Savannah Resources Plc Annual Report 2014

Plain-text annual report

235402 Savannah cover 26/02/2015 15:56 Page ofc1 SAVANNAH RESOURCES PLC Company No 07307107 ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 235402 Savannah p01-p17 26/02/2015 15:57 Page 1 CONTENTS BUSINESS REVIEW Chairman’s Statement Chief Executive’s Report Strategic Report GOVERNANCE Report of the Directors Corporate Governance Statement Statement of Directors’ Responsibilities Report of the Independent Auditors FINANCIAL STATEMENTS Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Cash Flows Notes to the Consolidated Financial Statements NOTICE OF THE ANNUAL GENERAL MEETING COMPANY INFORMATION Page 2 4 8 10 14 15 16 18 19 20 21 22 23 24 25 54 IBC SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 1 235402 Savannah p01-p17 26/02/2015 15:57 Page 2 CHAIRMAN’S STATEMENT I am pleased to report that this has been another year of growth and development for Savannah, which has been deﬁned by a number of key milestone developments, resulting in the transformational restructure of our portfolio. In addition to advancing our 180km² Jangamo heavy mineral sands project in Mozambique (‘Jangamo’), we are now also focussed on the evaluation of three highly prospective copper blocks, located in mineral rich Oman, which we acquired in 2014. Additionally, during the period, and as part of this restructure, we divested interests in our legacy Mali gold projects to AIM quoted Alecto Minerals Plc. Blocks 4, 5 and 6 Copper Projects, Oman We remain focussed on implementing an active exploration programme at our copper blocks in Oman, where we have a current Indicated and Inferred Mineral Resource of 1.7Mt at 2.2% copper at the Mahab 4 prospect in Block 5. With a number of highly prospective targets now identiﬁed through targeted reconnaissance and sampling work, these assets continue to prove their investment value. Additionally, Oman continues to present itself as a compelling copper investment opportunity, oﬀering a relatively low operating cost setting and enjoying the beneﬁts of an extensive array of road, power, smelting and port infrastrucure. With this in mind, and followign the completion of the acquisition of Gentor Resources Limited, we took the strategic decision during the year to increase our tenement holdings in Oman. In November 2014 we secured an interest in Block 4, which builds upon our current Block 5 and Block 6 holdings, and increases our in-country tenement package to over 1,270 km². With a strengthened in-country position and key target prospects identiﬁed via geophysics, we commenced drilling in late January 2015. Jangamo Heavy Mineral Sands, Mozambique Our most recent achievement during this period has been the delineation of a maiden Inferred Mineral Resource Estimate of 65Mt at 4.2% Total Heavy Minerals (‘THM’) at our Jangamo Project. This notable development, which we announced in December 2014, not only validates our exploration concept but also marks a signiﬁcant step in unlocking the value potential of our project. Importantly, this resource was deﬁned from a modest initial round of resource drilling over a small area of the eastern part of the large Jangamo tenement and the mineralisation remains open along strike. Consequently I am conﬁdent that signiﬁcant upside opportunity remains to increase this resource, which we intend to target through future exploration scheduled to commence after the end of the wet season late in the ﬁrst half of 2015. Portfolio Investment in Alecto During the year we increased our shareholding in AIM listed Alecto Minerals Plc (“Alecto”) by 42.8% via the conversion of a loan note and the divestment of the Company’s legacy Mali projects (Karan and Diatissan) to Alecto in March 2014 for £250,000 worth of shares in Alecto. At the end of 2014 we had a 19.6% shareholding in Alecto and as of 23 February 2015 the shareholding had reduced to 14.5%. Annual General Meeting At the forthcoming AGM Shareholders will be asked to renew the usual equity securities issue authorities, which includes a resolution in respect of a Share Exchange Agreement to acquire an 80% shareholding in Matilda Minerals Lda. This requires the Company to issue up to AUD $1,500,000 worth of shares as deferred consideration should a JORC Indicated Resource of up to 500Mt @ 3% THM at the Jangamo project be established. Financials As is to be expected with an exploration company, Savannah is reporting a loss for the year of £1.92m (2013: £2.04m), and Other Comprehensive Income loss for the year of (£2.19m) (2013: £1.48) for which the signiﬁcant driver is the write down in the value of the Company’s investment in Alecto, whose share price had been at a 2 ½ year high at the end of 2013. Net assets have remained unchanged at £4.75m (2013: £4.75m) and as at 31 December 2014, cash balances were £1.78m (2013: £0.85m). This is reﬂective of our increased tenement holdings in Oman and targeted evaluation programmes at our projects. Cash balances during the period were also bolstered with a placing of £1.5m cash in March 2014 and two placings in November 2014, which collectively raised £1.6m cash. These placings were with both new and existing investors and the funds raised were used to support exploration eﬀorts in Oman and Mozambique and to provide working capital. 2 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p01-p17 26/02/2015 15:57 Page 3 CHAIRMAN’S STATEMENT During the period the Board also took the strategic decision to terminate the private placing agreement it had with the Bergen Global Opportunity Fund, LP. This agreement, which was made in April 2014, provided a ﬂexible source of working capital. A total of £1.0m was raised under this facility. The Company recognises the necessity to reward key executives fairly and appropriately for performance so that it can operate on a sustainable basis. Mr Archer was paid neither Directors’ fees nor salary either from the time of his appointment as a Director in April 2013 or from the time of his appointment as CEO in August 2013. As a result of the Company’s signiﬁcant progress and the transformational changes made, which saw the disposal of all the Mali projects and the addition of projects in Mozambique and Oman, the Board elected to commence paying a salary to the CEO eﬀective from April 2014. Social Responsibility The Company and its management team are cognisant of their social and environmental responsibilities in the areas in which we operate and are committed to the development and maintenance of good relationships with local communities. To this end, the Board has formulated a Health, Safety, Environment and Community Relations policy that focuses on the positive interaction with all parties. This policy has been adopted and already forms the basis for eﬀective community relations in our permit areas. Outlook With an established portfolio of highly prospective projects in place I am delighted with the progress we continue to make. Your Board remains committed to maintaining an active growth path for the Company through 2015. In Mozambique, with a Mineral Resource established and signiﬁcant upside opportunity identiﬁed, the recommencement of drilling, will be another substantial milestone in unlocking the project’s inherent value. This is expected to commence late in the ﬁrst half of 2015. In tandem with this planned exploration programme, drilling of multiple, high calibre, near surface drill targets in Oman is currently underway. Although we have a strong understanding of our licence areas thanks to the thorough evaluation work conducted to date by both previous explorers and our ourselves, the collection and analysis of drill data will provide greater clarity to the resource potential of these mineral rich blocks. Importantly, we have a proven team with an excellent track record in identifying promising exploration assets into proﬁtable, producing and advancing them companies. With this industry experience, a highly prospective portfolio of assets in place, and targeted development path to pave the road ahead, I expect 2015 to be a very active year for the Company. This will be the last Chairman’s Statement that I write as I will be stepping down from the Board with eﬀect from tomorrow. It has been my pleasure to serve as the Company’s Chairman for two years during which time there has been signiﬁcant portfolio transformation and organisational growth in size and capability. Finally, I would like to take this opportunity to thank our shareholders, advisers and management team for their continued support and hard work and to welcome the incoming Chairman, Matthew King, who has enjoyed a very successful career and who is due to commence his appointment tomorrow. Mike Johnson Chairman Date: 24 February 2015 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 3 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p01-p17 26/02/2015 15:57 Page 4 CHIEF EXECUTIVE’S REPORT During 2014 Savannah has remained committed to its strategy of building a geographically diverse, multi- commodity exploration and development portfolio. I am delighted to report on the signiﬁcant operational progress that we have made during the period across our portfolio, which comprises the Blocks 4, 5 and 6 Copper Projects in the highly prospective, copper-rich, Semail Ophiolite belt in the Sultanate of Oman, and our Jangamo Heavy Mineral Sands Project in Mozambique. With two points of commodity focus, copper and mineral sands, I believe we have secured a signiﬁcant portfolio from which to realise solid growth for the year ahead and in-turn realise shareholder value. I am delighted to say that it has been a very active year. We have completed multiple drilling and geophysical exploration programmes over multiple projects in multiple geographies on time and on budget. This is a clear demonstration of the technical and operational capabilities of Savannah’s team. Our activity is both designed to get results and to leverage the maximum impact oﬀ our ﬁxed cost base. Blocks 4, 5 and 6 Copper Projects, Oman Savannah has rights to three highly prospective blocks covering 1,270km² in the copper-rich, Semail Ophiolite belt in the Sultanate of Oman, which is proven to host clusters of moderate to high grade copper deposits with gold credits and metallurgically simple ores. The three blocks are located some 180km north west of Muscat, the capital city of Oman and within close proximity to the export Port of Sohar. We are focusing our exploration on the discovery of Cyprus type Volcanic Massive Sulphide (‘VMS’) deposits. They occur on and below fossil seaﬂoors, generally within maﬁc to intermediate volcanic rocks and lesser metalliferous sediments/umbers. Mineralisation is comprised of two key zones, a massive sulphide zone and an underlying stringer zone. We believe the Blocks provide Savannah with an excellent opportunity to potentially evolve into a mid- tier copper producer in a relatively short time frame. Together with our Omani partners, we aim to outline further mineral resources on Blocks 4, 5 and 6, to provide the critical mass for a central operating plant to develop the deposits as part of a broad consolidation strategy. We very strongly believe that this is exactly the right time in the cycle to be building an aggregated copper resource in Oman. Projections by most informed copper commentators and analysts highlight a copper deﬁcit appearing in the period 2017 to 2020. This is projected to support an increase in the copper price towards the USD$4.00 per lb mark from today’s USD$2.50. The strategic market setting is therefore favourable and this is matched by the extremely attractive features for copper mining in Oman. These features include a favourable ﬁscal and legislative regime, a government that is strongly supportive of mining, an excellent infrastructure base (roads, power, water, ports and a copper smelter) and a favourable cost setting with very low transport and fuel costs. Savannah has the right to earn a 65% interest in Block 4, a 65% holding in Block 5 and the right to earn up to a 70% interest in Block 6. The acquisition of Gentor Resources Limited, which has the rights to Blocks 5 and 6, was completed in July 2014 for an initial outlay of USD$0.8 million cash with deferred consideration of USD$3.0 million in cash and shares payable on achievement of milestones relating to a potential mine development (further information relating to the terms of the acquisition can be found in Note 21). As we believe the region hosts a number of highly prospective exploration opportunities we took the strategic decision in-country position through the to expand our acquisition of Block 4; in November 2014 Savannah entered into an agreement to acquire up to a 65% shareholding in Al Thuraya LLC by spending up to USD$4.6 million over 4 years. Al Thuraya wholly owns the highly prospective Block 4 (further information relating to the terms of the acquisition can be found in Note 23). This acquisition increases the Company’s total land package in Oman to 1,270 km². Block 5 currently holds a near-surface, collective Indicated and Inferred Mineral Resource of 1.7Mt @ 2.2% Cu (including a high-grade zone of ~0.5Mt @ 4.5% Cu) which spans the Mahab 4 and Maqail South target areas. Previous drilling on Block 5 has highlighted its prospectivity with high grade intersections from multiple areas including 56.35m at 6.21% Cu from the Mahab 4 4 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p01-p17 26/02/2015 15:57 Page 5 CHIEF EXECUTIVE’S REPORT prospect, 6.68m at 7.42% Cu from Maqail South, 5.54m at 3.96% Cu from Hara Kilab and 5m at 2.81% Cu from Mahab 2. Block 4 includes over 35km in strike of prospective ophiolite with multiple prospective contacts, has seen very little exploration using modern techniques and is a prime target for the application of technologies such as VTEM. initially Exploration undertaken by Savannah has focussed on evaluating potential open pittable targets. First round re-processing of geophysical data (Versatile Time Domain Electromagnetic airborne survey (‘VTEM’) originally completed in 2010) was undertaken by Savannah in mid-2014 and 94 prospective anomalies were identiﬁed, with eight Priority 1 and 12 Priority 2 exploration targets identiﬁed on Blocks 5 and 6. In addition, ﬁeld reconnaissance by way of a ground based electro-magnetic (‘EM’) survey of high priority VTEM targets identiﬁed a new cluster of targets within Block 5 and Block 4: Sarami West (Block 5), Wadi Ahin (Block 5) and Ghayth Prospect (Block 4). To better understand the mineralisation potential, Versatile Time Domain Electromagnetic Surveying (‘VTEM’) was completed in December 2014 over these targets, with the results published post period end in January 2015. The strongest anomaly was identiﬁed at Sarami West, which has a very high conductance, spans over 200m, and remains open to the south. Importantly, Sarami West appears to be larger and of similar intensity to the nearby Mahab 4 copper deposit anomaly where an Inferred Mineral Resource has been previously deﬁned, illustrating the potential for resource expansion should the drilling be successful. Furthermore, the VTEM survey did not identify any potential sources for a false anomaly, increasing the chances that the anomalies are potentially the result of copper bearing sulphides at depth. It is our intention for the year ahead to advance Blocks 4, 5 and 6 up the value curve and accordingly a 2,000m diamond drilling programme commenced in January 2015. With a highly capable exploration team already in place I look forward to utilising our in-country advantage within Oman’s mineral exploration industry as we focus on establishing the Company as a mid-sized copper producer. I look forward to updating shareholders on this progress throughout the year. is Jangamo Heavy Mineral Sands, Mozambique As previously noted, our 180km² Jangamo project is located in a world-class mineral sands province in southern Mozambique. The Project located immediately to the west of Rio Tinto’s (‘Rio’) Mutamba deposit along an extensive dune system prospective for mineral sands including ilmenite, zircon and rutile near the village of Jangamo, approximately 350km north east of the capital Maputo. Mutamba is one of two major deposits Rio has deﬁned in Mozambique, which, together with the other deposit has a collective exploration target of 7-12Bn tonnes at 3-4.5% THM (published in 2008). The prices for the main constituents of mineral sands, (the TiO2 feedstocks, ilmenite, rutile and zircon) are cyclically weak at present. Existing producers are struggling and investment in exploration is limited. Consumer demand for paints, paper and plastics will inevitably turn up as will prices for TiO2 feedstocks. Companies like Savannah that secure strong resource positions at this point of the cycle can be well rewarded. We believe Mozambique is an ideal geography to put this plan in place. The long, heavy mineral rich coastline of Mozambique still remains relatively underexplored and our experience over the last 18 months is that the Mozambique government is very supportive of our exploration investment in the country. We have made signiﬁcant progress during 2014 with the completion of three major rounds of scout and resource deﬁnition drilling and an airborne geophysical survey. The programmes have highlighted Jangamo’s potential to host higher grade, commercial, heavy mineral sands deposits. Signiﬁcantly, our exploration indicates that the geology and geomorphology of Jangamo is similar to that of Mutamba. Consistent with our promise to the market we reached a major milestone in December 2014 with the announcement of a maiden JORC compliant Inferred Mineral Resource of 65Mt at 4.5% total heavy minerals (‘THM’). This was calculated after two separate drilling programmes of 3,990m and 1,920m, and importantly, in line with our strategy, successfully targeted extensions SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 5 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p01-p17 26/02/2015 15:57 Page 6 CHIEF EXECUTIVE’S REPORT in the Jangamo of the Mutamba mineralisation tenement with focus of deﬁning mineralisation at the upper end of the grade range for the Mutamba deposit of over 4% THM. Details of the resource are contained in Table 1 below. the primary Table 1 Resource Table (2.5% Cut oﬀ) Zones Category Sand (Mt) % THM % Ilmenite in HM % Ilmenite in sand % Rutile in sand % Zircon in sand HM (Mt) Ilmenite (Mt) Rutile (Mt) Zircon (Mt) Jangamo Inferred 65 4.2 60 2.5 0.083 0.15 2.7 1.6 0.054 0.1 Note: The table above has been prepared on a gross basis showing 100% interest. Savannah has an 80% indirect interest in the Jangamo Project. At this juncture I feel it is important to note the signiﬁcant upside potential of the Jangamo project. The maiden Mineral Resource was deﬁned and announced in not much more than 12 months after we started our ground work in Mozambique on what was essentially a green ﬁelds’ tenement. Resource evaluation is staged in nature and we will be looking to further expand the Mineral Resource during calendar 2015. It is noteworthy that the maiden resource was deﬁned over two small areas in the eastern arm of the tenement. These areas are a small part of the 180 km² Jangamo tenement. The Mineral Resource remains open along strike and there are a number of areas identiﬁed during the 2014 exploration programme, which require follow up work and resource drilling. Jangamo is a large system and we are focused on deﬁning a higher grade project that has superior economic characteristics for the development of a proﬁtable mining operation with modest capital costs. This complements the favourable local infrastructure setting that beneﬁts from nearby roads, power, and port. In this vein, further work is already planned for the 2015 ﬁeld season including: metallurgical testwork to characterise the potential product from any project development; further drilling around the newly deﬁned Inferred Mineral Resource to further expand the resource base; and further grid based resource drilling around anomalous exploration drill holes. Signiﬁcantly we have also identiﬁed a major HMS system in the western part of the tenement. Scout drilling undertaken along the 15km strandline has intersected encouraging zones of mineralisation with excellent intersections of up to 45m at 3.51% THM from 12m in JMRC133. The western system, which extends over at least 10km in strike, will form one of the main focuses of the ongoing exploration programme in 2015. Chairman I would also like to bring to shareholders’ attention the fact that Mike Johnson has decided to step down as Chairman and eﬀective tomorrow is due to be replaced by Matthew King. This change is a result of Mike having successfully steered the Company through its recent transitional phase where it exited its West African gold projects and acquired interests in projects in its two new core geographies of Oman and Mozambique in copper and heavy minerals respectively. Under Mike’s stewardship the Company has strengthened its balance sheet, established a key management group and secured a valuable portfolio of new projects. Mike had always made it clear that once this transitional phase had been successfully implemented he would look to stand down and in that regard the Company wishes to thank Mike very much for his very signiﬁcant contribution and to also wish him well in all his future endeavours. The Company is very fortunate to be able to appoint a successor with the experience and qualiﬁcations of Matthew King. Matthew has had a long and distinguished career in international banking. His particular competencies are in the arenas of corporate governance, operational risk and compliance. Share Price Savannah’s share price has traded in a very wide range over the last 12 months. In recent days it has traded at new lows. Clearly some of this is the result of the diﬃcult market conditions generally for small cap explorers. This has been exacerbated by the recent decline in the prices 6 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p01-p17 26/02/2015 15:57 Page 7 CHIEF EXECUTIVE’S REPORT of a wide range of commodities including copper. We remain convinced that copper is the leading industrial metal and the recent drop in its price will be short lived. Despite what the share price might suggest we have achieved a lot in 2014. We have secured a commanding position in the Oman Ophiolite Belt which hosts a proliﬁc number of copper deposits, and we have executed on our plan; starting in July 2014 with the completion of the acquisition of Blocks 5 and 6 in Oman, which was followed by the acquisition of Block 4, we have identiﬁed prospective drill targets and are currently drilling away – all within some seven months of starting. The timely execution of these initial steps highlights both our intent and capability to move forward and develop as a copper producer. At the same time we have underscored the prospectivity of Jangamo with the declaration of a maiden Mineral Resource. In summary, Savannah is a much more resilient company in 2015 than it was in 2014 and is well positioned to deliver shareholder value during 2015. Outlook We have two very able operations teams in Oman and Mozambique implementing our exploration and evaluation activities. In Oman the next step in our evaluations will be to complete a 1,200m drilling programme which started in late January 2015 at Block 5 and Block 4, on a number of high priority targets identiﬁed. In conjunction with this, we look forward to building upon the now established Inferred Mineral Resource of 65Mt at 4.2% total heavy minerals at our Jangamo Heavy Mineral Sands Project in Mozambique through further drilling, planned to begin late in the ﬁrst half of 2015. In parallel with our existing activities as outlined here we are working on other signiﬁcant associated initiatives which could result in a major step change for the Company. I ﬁrmly believe that 2015 will be one of great opportunity for Savannah, and I look forward to providing shareholders with regular updates on these developments in due course. David S Archer Chief Executive Oﬃcer Date: 24 February 2015 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 7 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p01-p17 26/02/2015 15:57 Page 8 STRATEGIC REPORT Section 414A of the Companies Act 2006 (the ‘Act’) requires that the Company inform members as to how the Directors have performed their duty to promote the success of the Company, by way of a Strategic Report. Set out below are the applicable reporting requirements under the Act for the purposes of the Strategic Report, together with guidance to other applicable sections of the 2014 Annual Report, which are incorporated by reference into the Company’s Strategic Report. General Exploration Risk Mineral exploration is a high risk undertaking and there can be no guarantee that exploration will result in the discovery of an economically viable ore body. Exploration tenements are carefully selected by experienced experts in regions of proven prospective geology. A methodical, staged approach is taken to the work and diﬀerent technologies, as well as extensive ﬁeldwork, are used prior to drilling. Principal Activities The principal activity of the Group in the year under review was exploration for copper in Oman, and exploration for heavy mineral sands in Mozambique. Fair Review of the Business The loss of the Group as set out on page 18 is a fair reﬂection of the Group’s performance. The Group made a loss of £1,917,190 (2013: £2,041,743), of which to (2013: £905,576) was £1,444,157 administrative costs. Additionally the Company invested £1,473,922 (2013: £824,638) on mineral exploration and evaluation on the licences it holds (including the acquisition of Gentor Resources Ltd which has rights to exploration Blocks 5 and 6 in Oman); this is capitalised as an intangible asset as set out in Note 11 in the Financial Statements. related The loss for the year excluded the revaluation loss of £2,223,222 (2013: gain £1,430,435) in the Company’s investment in Alecto detailed in Note 13. A review of the Group’s prospects are included in the Chairman’s Statement on pages 2 to 3 and the Chief Executive’s Report on pages 4 to 7. information Future Development This in the Chairman’s is contained Statement on pages 2 to 3 and the Chief Executive’s Report on pages 4 to 7 under the heading “outlook”. Principal Risks and Uncertainties The board has identiﬁed various risk factors which taken individually or together may have a materially adverse eﬀect on the Company’s business. The principal risks and how they are managed are as follows: Attraction and Retention of Key People The success of the Company is dependent on the expertise and experience of the Directors and senior management and the loss of one or more could have a material adverse eﬀect on the Company. The Board has put in place a remuneration policy which includes a share option scheme in order to motivate and retain key employees. Future Funding Requirements The Company has an ongoing requirement to fund its exploration activities and may need to obtain ﬁnance from the equity markets in the future. Senior Management and the Board closely monitor the cashﬂows of the Group. Cashﬂow projections are presented regularly to the Board for review and this assists in ensuring expenditure is focussed on areas of greatest exploration potential. Overheads and administration costs are carefully managed. Exploration Licence Titles The licences will be subject to applications for renewal and any renewal is usually at the discretion of the relevant government authority. The licences in the Company’s portfolio have been the subject of legal due diligence in order to establish valid legal title. Country Risk At the reporting date, the Company carried out exploration in Oman and Mozambique. The legacy Malian projects were sold in March 2014. As a result, the Company operating in two countries beneﬁts from a diversiﬁcation of country risk. Country risk is further mitigated through the investment it holds in Alecto which has exploration licences in Ethiopia, Mali, Burkina Faso and Mauritania. This risk is mitigated by ensuring its work and expenditure the Company meets 8 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p01-p17 26/02/2015 15:57 Page 9 STRATEGIC REPORT development business. While the Directors believe the expectation reﬂected herein to be reasonable in view of the information available up to the time of the Board’s approval of this Strategic Report, the actual outcome may be materially diﬀerent owing to factors either beyond the Group’s control or otherwise within the Group’s control but, for example, resulting from a change of strategy. Accordingly, no reliance may be placed on the forward-looking statements. On behalf of the Board: David S Archer Chief Executive Oﬃcer Date: 24 February 2015 that in-country it prioritises obligations, employment and that it maintains good relationships at all levels with government, administrative bodies and other stakeholders. The board actively monitors relevant political and regulatory developments. local Analysis of the Development and Performance of the Business This information is contained in pages the Chairman’s Statement on pages 2 to 3, and the Chief Executive’s Report on pages 4 to 7. Analysis of the Position of the Business This information is contained in pages the Chairman’s Statement on pages 2 to 3, and the Chief Executive’s Report on pages 4 to 7. Analysis Using Key Financial Performance Indicators and Milestones At the reporting date the Company’s cash balance was £1,778,338 (2013: £859,616) and its investments in tradable securities was £1,129,602 (2013: £2,830,435). The Company raised £3,769,095 (2013: £968,491) cash via issuance of ordinary shares. The trading volumes in the Company’s shares increased signiﬁcantly to over 3.7m shares per day in December 2014 (2013: 2.4m). Analysis Using Other Key Performance Indicators and Milestones In July the Company acquired 100% of Gentor Resources Ltd, which own the highly prospective Block 5 and Block 6 Copper Projects in Oman. In November the Company entered into an agreement to acquire up to a 65% shareholding in Al Thuraya LLC which own the highly prospective Block 4 Copper Project in Oman. In December the Company announced a maiden inferred JORC Mineral Resource Estimate of 65Mt at its Jangamo Heavy Mineral Sands Project. The Company achieved its strategic transformation from being a single commodity, single country junior explorer to becoming a multi- commodity, multi-geography and development Company. exploration Approval of the Board This Strategic Report contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with a mineral exploration and SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 9 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p01-p17 26/02/2015 15:57 Page 10 REPORT OF THE DIRECTORS The Directors present their report with the Financial Statements of the Company and the Group for the year ended 31 December 2014. Dividends The Directors do not recommend the payment of a dividend (2013: £nil). Group’s Policy on Payment of Creditors The Group’s policy on the payment of all trade creditors is to ensure that the terms of payment, as speciﬁed and agreed with creditors, are not exceeded. Trade creditors as at 31 December 2014 represent 15 days (2013: 48 days) as a proportion of the total amount invoiced by creditors during the year ended on that date. Events Since the Reporting Date The Company issued 637,381 new ordinary shares as consideration for a digitised exploration database relating to the Block 4 Copper Project. The Company disposed of 16.1m shares in Alecto for consideration of £49k. The valuation of the Alecto shares at 31 December 2014 was based on a share price of £0.0065 and as at 23 February the share price was £0.0015. On 24 February 2015 the Company transferred US$400,000 (~GBP £257,500) as an initial capital contribution to achieve a 51% shareholding in Al Thuraya. Further details are included in Note 25 and in the Chairman’s Statement and Chief Executive’s Report. Directors The Directors who have held oﬃce during the period from 1 January 2014 to the date of this report (unless otherwise stated) are as follows: M S Johnson C Cannon-Brookes D S Archer D J Ferguson Directors’ Indemnity The Group has agreed to indemnify its Directors against third party claims which may be brought against them and has in place a Directors and Oﬃcers’ insurance policy. Financial Instruments Risk This information is contained in Note 20 to the ﬁnancial statements. Going Concern After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the Financial Statements. See Note 1 for further information. Statement as to Disclosure of Information to Auditors So far as the Directors are aware, there is no relevant audit information (as deﬁned by Section 418 of the Companies Act 2006) of which the Group’s auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Group’s auditors are aware of that information. Auditors The auditors, BDO LLP, will be proposed for re- appointment at the forthcoming Annual General Meeting. 10 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p01-p17 26/02/2015 15:57 Page 11 REPORT OF THE DIRECTORS The Directors’ beneﬁcial interest (including the beneﬁcial interests of their immediate family) in the ordinary shares of the Company are as follows: M S Johnson D S Archer No. of shares held at 31 December 2014 No. of shares held at 31 December 2013 4,040,000 22,222,224 4,040,000 22,222,224 The Directors’ interests in the share options, warrants options and warrants of the Company are as follows (further details can be found in Note 24): At 31 December 2014 Quantity Quantity granted at Lapsed 1 Jan during the during the year year 2014 Options/ Warrants at 31 Dec 2014 Exercise price Date of the grant First date of exercise Final date of exercise Share Options D J Ferguson M Johnson M Johnson C Cannon- Brookes C Cannon- Brookes Warrants D S Archer M S Johnson 5,321,776 1,500,000 – – – 2,030,000 – 5,321,776 – 1,500,000 – 2,030,000 3.0p 21/07/13 20/07/14 20/07/18 3.0p 22/09/13 22/03/14 21/09/18 03/07/17 5.0p 03/07/14 03/07/14 1,500,000 – – 1,500,000 3.0p 22/09/13 22/03/14 21/09/18 – 1,270,000 – 1,270,000 5.0p 03/07/14 03/07/14 03/07/17 11,111,112 4,475,000 – – (4,475,000) – 11,111,112 – 3.0p 24/09/13 12.5p 22/10/10 24/09/13 01/11/10 19/07/18 01/11/14 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 11 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p01-p17 26/02/2015 15:57 Page 12 REPORT OF THE DIRECTORS At 31 December 2013 Quantity Quantity granted at Lapsed 1 Jan during the during the year year 2013 Options/ Warrants at 31 Dec 2013 Exercise price Date of the grant First date of exercise Final date of exercise Share Options M C Jones* M C Jones * M C Jones * D J Ferguson M Johnson C Cannon- Brookes S D Oke* D D Chikohora* R A Williams* 3,000,000 – 2,100,000 – 1,575,000 – 5,321,776 – 1,500,000 – (1,500,000) 1,500,000 (700,000) 1,400,000 – 1,575,000 – 5,321,776 – 1,500,000 21/10/11 10.0p 22/10/10 21/10/15 4.62p 01/02/13 31/01/14 31/01/18 4.62p 30/09/13 30/09/13 01/10/18 3.0p 21/07/13 20/07/14 20/07/18 3.0p 22/09/13 22/03/14 21/09/18 – 1,500,000 – – – 750,000 600,000 500,000 – 1,500,000 – – – (750,000) (600,000) (500,000) 3.0p 22/09/13 22/03/14 21/09/18 21/10/15 21/10/15 06/03/16 10.0p 22/10/10 10.0p 22/10/10 16.1p 07/03/11 21/10/11 21/10/11 07/03/11 Warrant Options M C Jones* S D Oke* D D Chikohora* 3,000,000 750,000 600,000 – (1,500,000) 1,500,000 – – – – (750,000) (600,000) 12.5p 22/10/10 12.5p 22/10/10 12.5p 22/10/10 21/10/11 21/10/11 21/10/11 21/10/15 21/10/15 21/10/15 Warrants M C Jones* M S Johnson D S Archer 1,850,000 4,475,000 – – – 11,111,112 – 1,850,000 – 4,475,000 – 11,111,112 12.5p 22/10/10 12.5p 22/10/10 3.0p 24/09/13 01/11/10 01/11/10 24/09/13 01/11/14 01/11/14 19/07/18 *resigned during the year to 31 December 2013 12 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p01-p17 26/02/2015 15:57 Page 13 REPORT OF THE DIRECTORS The remuneration of Directors who held oﬃce during the year was as follows: Directors’ emoluments 2014 Directors’ emoluments 2013 Cash Non-cash share Salary Total Cash Non-cash share Salary Total Executive Directors D J Ferguson D S Archer* M C Jones (resigned 30 September 2013) Non-Executive Directors M S Johnson C Cannon-Brookes S D Oke (resigned 5 February 2013) D D Chikohora (resigned 5 February 2013) R A Williams (resigned 5 February 2013) C Harrison (resigned 21 May 2013) 76,778 142,500 – – – – – – – – 219,278 7,381 – – – 41,008 26,036 – – – – 74,425 84,159 142,500 – – 41,008 26,036 – – – – 29,151 – 188,783 – – – 23,333 14,583 14,583 – 35,192 – 9,634 – 35,583 35,583 – – – – 64,343 – 198,417 – 35,583 35,583 23,333 14,583 14,583 – 293,703 270,433 115,992 386,425 *Mr D S Archer was paid neither Directors’ fees nor salary either from the time of his appointment as a Director in April 2013 or from the time of his appointment as CEO in August 2013. As a result of the Company’s signiﬁcant progress and the transformational changes made which saw the disposal of all the Mali projects, the acquisition of new projects in Mozambique and Oman and the marked increase in the scale and scope of the Company’s activities the board elected to commence paying a salary to the CEO eﬀective from April 2014. There is no entitlement to bonus payments. On behalf of the board: D S Archer Chief Executive Oﬃcer Date: 24 February 2015 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 13 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p01-p17 26/02/2015 15:57 Page 14 CORPORATE GOVERNANCE STATEMENT The Company, being listed on AIM, is not required to comply with the UK Corporate Governance Code (“the Code”) issued in May 2010. Although the Company does not comply with the Code, it has given consideration to the provisions set out in Section 1 of the Code annexed to the Financial Conduct Authority Listing Rules. The Directors support the objectives of the Code and intend to comply with those aspects that they consider relevant to the Group’s size and circumstances. Details of these are set out below. The Board of Directors The Board currently comprises two executive and two non-executive Directors. The Board formally meets approximately every month and is responsible for setting and monitoring Group strategy, reviewing budgets and ﬁnancial performance, ensuring adequate funding, examining major acquisition opportunities, formulating policy on key issues and reporting to the shareholders. Internal Financial Control The Board is responsible for establishing and maintaining the Group’s system of internal ﬁnancial controls. Internal ﬁnancial control systems are designed to meet the particular needs of the Group and the risk to which it is exposed, and by its very nature can provide reasonable, but not absolute, assurance against material misstatement or loss. The Directors are conscious of the need to keep eﬀective internal ﬁnancial control. Due to the relatively small size of the Group’s operations, the Directors are very closely involved in the day-to-day running of the business and as such have less need for a detailed formal system of internal ﬁnancial control. The Directors have reviewed the eﬀectiveness of the procedures presently in place and consider that they are appropriate to the nature and scale of the operations of the Group. The Directors have implemented necessary controls and procedures to comply with the UK Bribery Act 2010. The Audit Committee An Audit Committee has been established which comprises two non-executive Directors – Charlie Cannon-Brookes (who chairs the Committee), Dale is Ferguson and Mike Johnson. The Committee responsible for ensuring that the ﬁnancial performance of the Group is properly reported on and monitored, and for meeting the auditors and reviewing the reports from the auditors relating to accounts and internal controls. The Committee also reviews the Group’s annual and interim Financial Statements before submission to the Board for approval. The role of the Audit Committee is also to consider the appointment of the auditors, audit fees, scope of audit work and any resultant ﬁndings. It The Remuneration Committee The Remuneration Committee comprises two non- executive Directors – Charlie Cannon-Brookes (who chairs the Committee) and Mike Johnson. is responsible for reviewing the performance of the executive Directors and for setting the scale and structure of his remuneration, paying due regard to the interests of shareholders as a whole and the performance of the Group. The remuneration of the Chairman and the non-executive Director is determined by the Board as a whole, based on a review of the current practices in other companies. The Chairman and non-executive Director are entitled to a nominal value of £1 per annum for their services. Anti-Bribery and Corruption It is the Company’s policy to conduct business in an honest way, and without the use of corrupt practices or acts of bribery to obtain an unfair advantage in line with the UK Bribery Act 2010. The Company takes a zero- tolerance approach to bribery and corruption and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships wherever it operates and implementing and enforcing eﬀective systems to counter bribery. The Directors are responsible for preparing the Director’s report and the Financial Statements in accordance with applicable law and regulations 14 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p01-p17 26/02/2015 15:57 Page 15 STATEMENT OF DIRECTORS’ RESPONSIBILITIES Website Publication The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance is the integrity of the Company’s website and responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the Financial Statements contained therein. Company law requires the Directors to prepare Financial Statements for each ﬁnancial year. Under that law the Directors have elected to prepare the Group and Company Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under Company law the Directors must not approve the Financial Statements unless they are satisﬁed that they give a true and fair view of the state of aﬀairs of the Group and Company and of the proﬁt or loss of the Group for that period. The Directors are also required to prepare Financial Statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these Financial Statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • • state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the Financial Statements; prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are suﬃcient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the ﬁnancial position of the Company and enable them to ensure that the Financial Statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 15 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p01-p17 26/02/2015 15:57 Page 16 REPORT OF THE INDEPENDENT AUDITORS to the members of Savannah Resources Plc We have audited the ﬁnancial statements of Savannah resources Plc for the year ended 31 December 2014 which comprise the consolidated statement of comprehensive income, the consolidated and Company statement of ﬁnancial position, the consolidated and Company statement of changes in equity, the consolidated and Company statement of cash ﬂows and the related notes. The ﬁnancial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent Company statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of Directors and Auditors As explained more fully in the statement of Directors’ responsibilities, the Directors are responsible for the preparation of the ﬁnancial statements and for being satisﬁed that they give a true and fair view. Our responsibility is to audit and express an opinion on the ﬁnancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors. Scope of the Audit of the Financial Statements A description of the scope of an audit of ﬁnancial statements is provided on the FRC’s website at www.frc.org.uk/apb/scope/private.cfm. Opinion on Financial Statements In our opinion: • • • the ﬁnancial statements give a true and fair view of the state of the group’s and the parent Company’s aﬀairs as at 31 December 2014 and of the group’s loss for the year then ended; the group ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent Company ﬁnancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006. 16 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p01-p17 26/02/2015 15:57 Page 17 REPORT OF THE INDEPENDENT AUDITORS Opinion on Other Matters Prescribed by the Companies Act 2006 In our opinion the information given in the strategic and Directors’ reports for the ﬁnancial year for which the ﬁnancial statements are prepared is consistent with the ﬁnancial statements. Matters on Which we are Required to Report by Exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • • • adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the parent Company Financial Statements are not in agreement with the accounting records and returns; or certain disclosures of Directors’ remuneration speciﬁed by law are not made; or • we have not received all the information and explanations we require for our audit. Scott Knight (senior statutory auditor) For and on behalf of BDO LLP, statutory auditor 55 Baker Street London W1U 7EU United Kingdom 24 February 2015 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 17 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p18-p24 26/02/2015 15:57 Page 18 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2014 Continuing Operations Revenue Administrative expenses Operating loss Finance income Finance costs Loss before tax Taxation Loss for period from continuing operations Loss for the period from discontinued operations Loss for the year attributable To equity owners of the parent Other comprehensive income Change in market value of investments Exchange gains/(losses) arising on translation of foreign operations Other comprehensive income for the year Total comprehensive income for the year attributable to equity owners of the parent Loss per share attributable to equity owners of the parent expressed in pence per share: Basic and diluted From Loss for the year attributable to equity owners of the parent From Continuing operations From Discontinued operations Notes 2014 £ 2013 £ (1,444,157) (1,444,157) 18,818 (491,851) (1,917,190) – (1,917,190) – – (905,576) (905,576) 228,433 – (677,143) – (677,143) (1,364,600) (1,917,190) (2,041,743) (2,223,222) 31,350 (2,191,872) 1,430,435 51,990 1,482,425 (4,109,062) (559,318) (1.14) (1.14) – (2.04) (0.68) (1.36) 5 5 6 7 8 13 10 10 10 The notes form part of these Financial Statements. 18 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p18-p24 26/02/2015 15:57 Page 19 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2014 Assets Non-current assets Intangible assets Property, plant and equipment Investments Other receivables Total non-current assets Current assets Investments Loan receivables Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity and liabilities Shareholders’ equity Share capital Share premium Foreign currency reserve Warrant reserve Share based payment reserve Merger reserve Retained earnings Total equity attributable to Equity holders of the parent Liabilities Current liabilities Trade and other payables Total liabilities Total equity and liabilities Notes 2014 £ 2013 £ 11 12 13 15 13 14 15 16 18 1,974,128 30,245 – 17,049 2,021,422 1,129,602 – 82,590 1,778,338 2,990,530 5,011,952 699,138 – 2,830,435 2,998 3,532,571 – 573,380 108,215 859,616 1,541,211 5,073,782 2,231,697 8,539,626 36,171 362,252 619,423 – (7,034,355) 1,383,658 5,460,305 35,578 850,611 497,181 572,314 (4,045,757) 4,754,814 4,753,890 19 257,138 257,138 319,892 319,892 5,011,952 5,073,782 The Financial Statements were approved by the Board of Directors on 24 February 2015 and were signed on its behalf by: D S Archer Executive Director Company number: 07307107 The notes form part of these Financial Statements. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 19 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p18-p24 26/02/2015 15:57 Page 20 COMPANY STATEMENT OF FINANCIAL POSITION as at 31 December 2014 Assets Non-current assets Intangible assets Investments Other receivables Total non-current assets Current assets Investments Loan receivables Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity and liabilities Shareholders’ equity Called up share capital Share premium Warrant reserve Share based payment reserve Retained earnings Merger reserve Total equity Liabilities Current liabilities Trade and other payables Total liabilities Total equity and liabilities Notes 2014 £ 2013 £ 11 13 15 13 14 15 16 18 19 47,391 281 2,301,121 2,348,793 1,129,602 – 58,994 1,634,371 2,822,967 5,171,760 3,153 2,956,562 310,354 3,270,069 – 573,380 107,225 855,023 1,535,628 4,805,697 2,231,697 8,539,626 362,251 619,423 (6,738,170) – 1,383,658 5,460,305 850,611 497,181 (3,424,075) (82,188) 5,014,827 4,685,492 156,933 156,933 120,205 120,205 5,171,760 4,805,697 The Financial Statements were approved by the Board of Directors on 24 February 2015 and were signed on its behalf by: D S Archer Executive Director Company number: 07307107 The notes form part of these Financial Statements. 20 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p18-p24 26/02/2015 15:57 Page 21 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2014 Share Share capital premium £ £ Foreign currency Warrant reserve £ reserve £ Share based payment reserve and warrant reserve £ Retained earnings £ Merger reserve £ Total equity £ At 1 January 2013 842,133 4,997,699 (16,412) 579,500 577,260 (3,646,829) 572,314 3,905,665 Loss for the year Other comprehensive income Total comprehensive income for the year Issue of share capital Issue of warrants Share based payments Share options lapsed 541,525 – – – Loss for the year Other comprehensive income – – – Total comprehensive income for the year Issue of share capital Issue of warrants Expiry of warrants Disposal of subsidiaries Foreign exchange on disposal of subsidiaries– – Share based payments – – – – – – – – – 51,990 51,990 – – – – (2,041,743) – (2,041,743) – 1,430,435 – 1,482,425 – (611,308) – (559,318) 733,717 (271,111) – – – – – – – 271,111 – – 132,301 (212,380) – – – 212,380 – 1,275,242 – – 132,301 – – – At 31 December 2013 1,383,658 5,460,305 35,578 850,611 497,181 (4,045,757) 572,314 4,753,890 – – – – 31,350 31,350 – – – – (1,917,190) – (1,917,190) – (2,223,222) – (2,191,872) – (4,140,412) – (4,109,062) 848,039 3,170,461 (91,140) – – – – – – – 91,140 (579,500) – – – – – – – 579,500 572,314 – 4,018,500 – – – – – (572,314) – – (30,757) – – – – 122,242 – – – – (30,757) 122,242 At 31 December 2014 2,231,697 8,539,626 36,171 362,252 619,423 (7,034,355) – 4,754,814 The following describes the nature and purpose of each reserve within owners’ equity: Reserve Share capital Share premium Description and purpose Amounts subscribed for share capital at nominal value. Amounts subscribed for share capital in excess of nominal value. Foreign currency reserve Gains/losses arising on retranslating the net assets of Group operations into Pound Sterling. Warrant reserve Share based payment reserve Retained earnings Merger reserve Fair value of the warrants issued. Represents the accumulated balance of share based payment charges recognised in respect of share options granted by Savannah Resources Plc, less transfers to retained losses in respect of options exercised and lapsed. Cumulative net gains and losses recognised in the consolidated statement of comprehensive income. Amounts resulting from acquisitions under common control. The notes form part of these Financial Statements. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 21 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p18-p24 26/02/2015 15:57 Page 22 COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2014 Share capital premium £ Share Warrant reserve £ £ Share based payment reserve £ Retained earnings £ Merger reserve £ Total equity £ At 1 January 2013 842,133 4,997,699 579,500 577,260 (3,008,739) (82,188) 3,905,665 Loss for the year Other comprehensive income – – – – – – – (2,058,151) – 1,430,435 – (2,058,151) – 1,430,435 Total comprehensive income for the year Issue of share capital Issue of warrants Share based payments Share options lapsed – 541,525 – – – – 733,717 (271,111) – – – – 271,111 – – – – – 132,301 (212,380) (627,716) – – – 212,380 – (627,716) – 1,275,242 – – 132,301 – – – At 31 December 2013 1,383,658 5,460,305 850,611 497,181 (3,424,075) (82,188) 4,685,492 Loss for the year Other comprehensive income – – – – – – – (1,588,185) – (2,223,222) – (1,588,185) – (2,223,222) Total comprehensive income for the year Issue of share capital Issue of warrants Expiry of warrants Disposal of subsidiaries Share based payments – – 848,039 3,170,461 (91,140) – – – – – – – – – 91,140 (579,500) – – – (3,811,407) – – – – 579,500 – (82,188) – – 122,242 – (3,811,407) – 4,018,500 – – – – – 82,188 122,242 – At 31 December 2014 2,231,697 8,539,626 362,251 619,423 (6,738,170) – 5,014,827 The following describes the nature and purpose of each reserve within owners’ equity: Reserve Share capital Description and purpose Amounts subscribed for share capital at nominal value. Share premium Amounts subscribed for share capital in excess of nominal value. Warrant reserve Fair value of the warrants issued. Share based payment reserve Represents the accumulated balance of share based payment charges recognised in respect of share options granted by Savannah Resources Plc, less transfers to retained losses in respect of options exercised and lapsed. Retained earnings Cumulative net gains and losses recognised in the consolidated statement of comprehensive income. Merger reserve Amounts resulting from acquisitions under common control. The notes form part of these Financial Statements. 22 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p18-p24 26/02/2015 15:57 Page 23 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2014 Cash ﬂows used in operating activities Loss for the year Depreciation and amortisation charges Impairment of intangible assets Proﬁt on disposal of subsidiaries Share based payment reserve charge Shares issued in lieu of payments to extinguish liabilities Finance income Finance expense Cash ﬂow from operating activities before changes in working capital Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Net cash used in operating activities Cash ﬂow used in investing activities Disposal of subsidiaries Purchase of intangible exploration assets Purchase of tangible ﬁxed assets Purchase of convertible loan notes Purchase of investments Interest received Net cash used in investing activities Cash ﬂow from ﬁnancing activities Interest paid Proceeds from issues of ordinary shares Net cash from ﬁnancing activities Increase/(Decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange diﬀerences Cash and cash equivalents at end of year Notes 2014 £ 2013 £ 11 4 5 (1,917,190) 12,254 – – 122,242 75,290 (18,818) 491,851 (1,234,371) 10,574 (106,739) (1,330,536) – (1,429,884) (37,733) – – 4,842 (2,041,743) 30,231 1,362,402 (180,048) 132,301 75,750 (228,433) – (849,540) (81,973) 140,066 (791,447) (21,653) (593,638) (6,380) (350,000) (150,000) 5,053 (1,462,775) (1,116,618) (2,768) 3,769,095 3,766,327 973,016 859,616 (54,294) – 968,491 968,491 (939,574) 1,767,381 31,809 1,778,338 859,616 The cash ﬂows from discontinued operations are disclosed in Note 8 to the Financial Statements. The notes form part of these Financial Statements. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 23 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p18-p24 26/02/2015 15:57 Page 24 COMPANY STATEMENT OF CASH FLOWS for the year ended 31 December 2014 Cash ﬂows used in operating activities Loss for the year Depreciation and amortisation charges Impairment of intercompany receivables Proﬁt on disposal of subsidiaries Share based payment reserve charge Shares issued in lieu of payments to extinguish liabilities Finance income Finance expense Cash ﬂow from operating activities before changes in working capital Increase in trade and other receivables Increase/(decrease) in trade and other payables Net cash used in operating activities Cash ﬂow used in investing activities Investment in subsidiaries Purchase of convertible loan notes Purchase of investments Purchase of intangible exploration assets Interest received Net cash used in investing activities Cash ﬂow from ﬁnancing activities Interest paid Proceeds from issues of ordinary shares Net cash from ﬁnancing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (1,588,185) 3,153 – (41,753) 122,242 75,290 (18,367) 491,163 (956,457) (2,024,857) 36,729 (2,058,151) 2,910 2,562,753 (1,249,900) 132,301 75,750 (228,433) – (762,770) (672,454) 56,805 (2,944,585) (1,378,419) (81) – – (47,391) 4,482 (42,990) (2,172) 3,769,095 3,766,923 779,348 855,023 – (350,000) (150,000) 5,053 (494,947) – 968,491 968,491 (904,875) 1,759,898 1,634,371 855,023 The notes form part of these Financial Statements. 24 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:57 Page 25 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2014 1. ACCOUNTING POLICIES Basis of Preparation These Financial Statements have been prepared in accordance with International Financial Reporting Standards, International Accounting standards and Interpretations (collectively “IFRSs”) as adopted by the EU and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Financial Statements have been prepared under the historical cost convention. The consolidated Financial Statements have been prepared by the merger method of accounting on the historical cost basis except, as explained in the accounting policies below. Historical cost is generally based on the consideration given in exchange for assets. The principal accounting policies are set out below. Presentational and Functional Currency The functional currency of the Company is Pound Sterling. Each entity in the Group determines its own functional currency and items included in the Financial Statements of each entity are measured using that functional currency. The presentational currency of the Group is Pound Sterling. Going Concern The Financial Statements have been prepared on a going concern basis. The Board consider that the Group has suﬃcient cash resources to enable it to continue to fund overheads and exploration on its projects. Basis of Consolidation The Group accounts consolidate the accounts of Savannah Resources Plc and its domestic and foreign subsidiaries, refer to Note 13. The foreign subsidiaries have been consolidated in accordance with IAS 27 and IAS 21 “The eﬀects of Foreign Exchange Rates.” Inter-company transactions and balances between Group companies are eliminated in full. Equity Investments Equity investments excluding subsidiaries are included on the balance sheet at fair value with value changes being recognised in other comprehensive income. Investments in equity instruments with no reliable fair value measurement are measured at cost. Investments in Subsidiaries and Associates Investments in subsidiaries, associates and jointly controlled entities are accounted for at cost within the individual accounts of the parent Company. These investments are classiﬁed as non-current assets on the balance sheet of the parent Company. Investments in subsidiaries, associates and jointly controlled entities are accounted for under the equity method of accounting within the consolidated accounts of the parent Company whereby the investment is initially recognised at cost and adjusted thereafter for changes in the investor’s share of the investee’s net assets. The investor’s proﬁt or loss includes its share of the investee’s proﬁt or loss and the investor’s other comprehensive income includes its share of the investee’s other comprehensive income. Foreign Currencies Transactions in foreign currencies are initially recorded in the functional currency by applying spot exchange rate ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 25 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:57 Page 26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES continued The income statements of individual Group companies with functional currencies other than Pound Sterling are translated into Pound Sterling at the average rate for the period and the balance sheet translated at the rate of exchange ruling on the reporting date. Exchange diﬀerences which arise from retranslation of the opening net assets and results of such subsidiary undertakings are taken to equity (“foreign currency reserve”). On disposal of such entities, the deferred cumulative amount recognised in equity relating to that particular operation is transferred to the consolidated statement of comprehensive income as part of the proﬁt or loss on disposal. Intangible Assets Deferred development costs Once an exploration licence or an option to acquire an exploration licence has been obtained, all costs associated with mineral property development and investments are capitalised on a project-by-project basis pending determination of the feasibility of the project. Costs incurred include appropriate technical and administrative expenses but not general overheads. If a mining property development project is successful, the related expenditures will be amortised over the estimated life of the commercial ore reserves on a unit of production basis. Where a licence is relinquished, a project is abandoned, or is considered to be of no further commercial value to the Savannah Resources Group, the related costs will be written oﬀ. Unevaluated mineral properties are assessed at reporting date for impairment in accordance with the policy set out below. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identiﬁable cash ﬂows (cash generating units) as disclosed in Note 11. If commercial reserves are developed, the related deferred development and exploration costs are then reclassiﬁed as development and production assets within property, plant and equipment. Mineral properties Mineral properties are recorded at cost less amortisation and provision for diminution in value. Amortisation will be over the estimated life of the commercial ore reserves on a unit of production basis. Acquisitions of Mineral Exploration Licences The acquisition of Gentor Resources Limited and Matilda Minerals Lda, was principally the acquisition of mining licences eﬀected through a non-operating corporate structure. As the structure does not represent a business, it is considered that the transaction does not meet the deﬁnition of a business combination. Accordingly the transaction is accounted for as the acquisition of an asset. Future consideration is contingent and is not recognised as an asset or liability. Other intangible assets Other intangibles are recorded at cost less amortisation and provision for diminution in value. Amortisation is calculated to write oﬀ the cost of each asset over its estimated useful life of 3 years. Property, Plant and Equipment Tangible non-current assets used in exploration and evaluation are classiﬁed within tangible non-current assets as property, plant and equipment. To the extent that such tangible assets are consumed in exploration and evaluation the amount reﬂecting that consumption is recorded as part of the cost of the intangible asset. 26 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:57 Page 27 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES continued Depreciation is provided on all items of property, plant and equipment in order to write oﬀ the cost less estimated residual value of each asset over its estimated useful life. Plant & Machinery Oﬃce Equipment Motor Vehicles 4 – 10 years 4 years 4 years Financial Instruments Financial assets and ﬁnancial liabilities are recognised in the Group’s statement of ﬁnancial position when the Group becomes a party to the contractual provisions of the instrument. Financial Assets Loans and receivables Loans and receivables are non-derivative ﬁnancial assets with ﬁxed or determinable payments that are not quoted in an active market. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the eﬀective interest rate method, less provision for impairment. Impairment provisions are recognised when there is objective evidence (such as signiﬁcant ﬁnancial diﬃculties on the part of the counterparty or default or signiﬁcant delay in payment) that the Savannah Resources Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the diﬀerences between the net carrying amount and the present value of the future expected cash ﬂows associated with the impaired receivable. For receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the statement of comprehensive income. On conﬁrmation that the receivable will not be collectable, the gross carrying value of the asset is written oﬀ against the associated provision. The Savannah Resources Group’s loan and receivables comprise other receivables and cash and cash equivalents in the Consolidated Statement of Financial Position. Cash and cash equivalents comprise cash in hand and balances held with banks. Cash equivalents are short term, highly liquid accounts that are readily converted to known amounts of cash. There is no signiﬁcant diﬀerence between carrying value and fair value of loans and receivables. Derivatives and embedded derivatives Derivatives are accounted for on the balance sheet at fair value with changes recognised in the income statement. Fair values are determined using the Black Scholes valuation methodology. Embedded derivatives are separated from their host contracts and accounted for as derivatives when they meet the deﬁnition of a derivative and the characteristics can be separated from those of the host contract. Financial Liabilities Other liabilities Other liabilities consist of trade and other payables, which are initially recognised at fair value and subsequently carried at amortised cost, using the eﬀective interest method. There is no signiﬁcant diﬀerence between the carrying value and fair value of other liabilities. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 27 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:57 Page 28 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES continued Taxation Current taxes are based on the results shown in the Financial Statements and are calculated according to local tax rules, using tax rates enacted or substantively enacted by the reporting date. Deferred tax is recognised in respect of all timing diﬀerences that have originated but not reversed at the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable proﬁts will be available against which timing diﬀerences can be utilised. Operating Leases Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. Share-based Payments Where equity settled share options are awarded to Directors and employees, the fair value of the options at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisﬁed, a charge is made irrespective of whether the market vesting conditions are satisﬁed. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Where the terms and conditions of options are modiﬁed before they vest, the change in the fair value of the options, measured immediately before and after the modiﬁcation, is also charged to the Consolidated Statement of Comprehensive Income over the remaining vesting period. Where equity instruments are granted to persons other than employees for goods and services received, the Consolidated Statement of Comprehensive Income is charged with the fair value of goods and services received or where this is not possible at the fair value of the equity instruments granted. Fair value is measured by use of an option pricing model. Key Accounting Estimates and Judgements The preparation of ﬁnancial information in conformity with IFRS requires the use of estimates and assumptions that aﬀect the reported amounts of assets and liabilities at the date of ﬁnancial information and the reported amounts of expenses during the reporting periods. Although these estimates are based on management’s best knowledge of the amounts, event or actions, actual results ultimately may diﬀer from those estimates. The key accounting estimates and judgements are set out below: (a) Carrying value of mineral properties and development costs The Savannah Resources Group assesses at each reporting period whether there is any indication that these assets may be impaired. If such indication exists, the Group estimates the recoverable amount of the asset. In the early stages of exploration an indication of impairment may arise from drilling and assay results or from management’s decision to terminate the project. The recoverable amount is assessed by reference to the higher of ‘value in use’, where a project is still expected to be developed into production (being the new present value of expected future cash ﬂows of the relevant cash generating unit) and ‘fair value less cost to sell’. Further details are set out in Note 11. 28 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:57 Page 29 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES continued (b) Exploration and evaluation costs The Savannah Resources Group has to apply judgement in determining whether exploration and evaluation expenditure should be capitalised within intangible assets as exploration and evaluation costs or expensed. The Savannah Resources Group has a policy of capitalising all exploration and evaluation costs (as set out above). Management therefore exercises judgement based on the results of economic evaluations, prefeasibility or feasibility studies in determining whether it is appropriate to continue to carry these costs as an intangible asset or whether they should be impaired. The total value of exploration and evaluation costs capitalised as at each of the reporting dates is set out in Note 11. (c) Share-based payments In determining the fair value of share-based payments made during the period, a number of assumptions have been made by management. The details of these assumptions are set out in Note 24. (d) Investment in Alecto Minerals plc The Directors have had to apply judgment in considering the accounting treatment of the Company’s investment in Alecto Minerals plc (‘Alecto’) with reference to its relationship with Alecto. Although during the year the Company held between 15.7% and 21.1% of Alecto’s shares, it is the Directors’ opinion that the investment in Alecto should be treated as an investment in the accounts of Savannah rather than as an associate on the basis that Savannah does not have the power to exert signiﬁcant inﬂuence over Alecto. Key factors behind the opinion of the Directors include: • • • • • • Proportion of shareholding; Inﬂuence of other shareholders; Board representation and inﬂuence over decision-making; The presence of any special voting rights; Transactions between the companies; Inter-change of managerial personnel. Accounting Developments During 2014 The International Accounting Standards Board (IASB) has issued the following new standards, amendments to published standards and interpretations to existing standards with eﬀective dates on or prior to 1 January 2014 which have been adopted by the Group for the ﬁrst time this year and which have not had a material eﬀect. The new standards and amendments relevant to the Group have been disclosed below: Eﬀective period commencing on or after Impact on Group Amendment to IAS 32 Oﬀsetting Financial Assets and Financial Liabilities Amendment to IAS 36 Impairment of Assets – Recoverable Amount Disclosures for Non-Financial Assets Amendments to IFRS 10, IFRS 12 and IAS 27 – Investment Entities 1 January 2014 No material impact 1 January 2014 No material impact 1 January 2014 No material impact SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 29 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:57 Page 30 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES continued Accounting Developments Not Yet Adopted Various new standards and amendments have been issued by the IASB up to the date of this report which are not applicable until future periods and some have not yet been endorsed by the European Union. The Directors do not expect these will have a material impact on the Financial Statements of the Group or Company. 2. SEGMENTAL REPORTING The Group complies with IFRS 8 Operating Segments, which requires operating segments to be identiﬁed on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker, which the Company considers to be the Board of Directors. In the opinion of the Directors, the operations of the Group comprise of exploration in Oman, exploration in Mali (discontinued), exploration in Mozambique, headquarter administration and corporate costs and the Company’s investments in Alecto Minerals Plc (“Alecto”). Based on the Group’s current stage of development there are no revenues associated to the segments detailed below. For exploration in Oman, Mali and Mozambique the segments are calculated by the summation of the balances in the legal entities which are readily identiﬁable to each of the segmental activities. In the case of the Investment in Alecto, this is calculated by analysis of the speciﬁc related investment instruments. Inter- Company loans are eliminated to zero and not included in each segment below. Oman Copper £ Exploration in Mali £ Mozam- Headquarter bique administration and corporate £ Mineral Sands £ Investment in Alecto £ Elimination £ Total £ – – 238 274,723 (177,694) 4,153 – (314,157) 13,976 (274,723) – – – (491,851) 18,367 2014 Revenue Finance costs Interest income Depreciation and amortisation Loss on disposal of subsidiaries (Loss)/proﬁt for the period Total assets Total non- current assets Additions to non-current assets Total current assets Total liabilities – – – – – – – – – – – – (3,784) – (1,568) – (134,315) 1,043,846 (126,152) 1,097,749 (1,356,542) 1,740,755 (300,181) 1,129,602 954,349 1,067,072 – 904,696 11,337 588,133 7,489 101,067 (83,839) – – 66,497 (18,767) 1,693,364 (154,531) 1,129,602 – – – – – – – – – – – – (3,784) (1,568) (1,917,190) 5,011,952 2,021,421 1,511,655 2,990,530 (257,137) 30 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:57 Page 31 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2. SEGMENTAL REPORTING continued Headquarter 2013 Exploration Mozambique administration Investment in Alecto £ in Mali Mineral Sands and corporate £ £ £ Depreciation and amortisation Proﬁt on disposal of subsidiaries Impairment of intangibles (Loss)/proﬁt for the period Total assets Total non-current assets Additions to non-current assets Total current assets Total liabilities (27,321) 180,048 (1,362,402) (1,377,175) 251,010 250,000 384,000 1,010 (5,366) – – – (18,490) 453,577 448,983 447,018 4,593 (188,839) (2,910) – – (869,458) 965,380 3,153 – 962,228 (125,687) – – – 223,380 3,403,815 2,830,435 2,830,435 573,380 – 3. EMPLOYEES AND DIRECTORS The average monthly number of employees during the year was as follows: Operational Non-operational Staﬀ Costs (excluding Directors) Salaries Social security Share based payment expense (see Note 24) Severance 2014 No 8 8 16 2014 £ 328,684 24,175 47,816 – 400,675 Total £ (30,231) 180,048 (1,362,402) (2,041,743) 5,073,782 3,532,571 3,661,453 1,541,211 (319,892) 2013 No 15 8 23 2013 £ 296,863 65,405 16,310 7,241 385,819 The numbers in the above table includes £242,460 (2013: £111,732) which was capitalised as an intangible asset. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 31 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:57 Page 32 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. EMPLOYEES AND DIRECTORS continued Directors’ Remuneration Salaries Social security Share based payment expense (see note 24) 2014 £ 219,278 18,841 74,425 312,544 2013 £ 270,433 5,233 115,992 391,658 The numbers in the above table includes £18,643 (2013: Nil) of Directors’ Remuneration which was capitalised as an intangible asset in relation to the provision of speciﬁc technical services. The Directors are considered to be the key management of the Group. Details of Directors’ remuneration and the highest paid Director are disclosed in the Report of the Directors. No Directors accrued pension beneﬁts during any of the periods presented. 4. (LOSS)/PROFIT ON DISPOSAL OF SUBSIDIARIES Consideration Net assets disposed 2014 £ 2013 £ 250,000 (251,568) 1,250,000 (1,069,952) (1,568) 180,048 On 27 March 2014 the Company sold to Alecto its subsidiary, NewMines Holdings Limited, which, through its wholly owned subsidiary Tobon Tondo, holds the exploration rights to the Karan and Diatissan gold projects in Mali. The consideration payable of £250,000 was satisﬁed by the issue of 20,000,000 ordinary shares in Alecto (see Note 13). In August 2013 the Group disposed of its investment in AME West Africa Limited and its’ subsidiary Caracal Gold S.A.R.L to Alecto Minerals plc (“Alecto”) for £1,250,000 worth of shares in Alecto (see Note 13). The net assets at the date of disposal comprised: Intangible assets Tangible assets Receivables Cash Payables 2014 £ 250,783 – 785 – – 251,568 2013 £ 910,190 148,643 6,162 21,653 (16,696) 1,069,952 32 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:57 Page 33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. FINANCE INCOME Deposit account interest Interest on convertible loan notes Movement on the valuation of derivative 2014 £ 4,842 13,976 – 18,818 2013 £ 5,053 45,196 178,184 228,433 The convertible loan notes are detailed in Note 14. The interest accruing on the loan notes is reﬂected above. FINANCE COSTS Bank charges Alecto derivative valuation and loan accretion Movement on the valuation of Bergen derivative 2014 £ 2,769 314,517 174,565 491,851 2013 £ – – – The movement in the value of the derivative at fair value at the reporting date are reﬂected above. 6. LOSS BEFORE INCOME TAX The loss before income tax is stated after charging Depreciation and amortisation Auditors’ remuneration: – Statutory audit of the Group Financial Statements – Other assurance services – Tax advice Foreign exchange diﬀerences Operating lease payments Share based payments 2014 £ 2013 £ 3,784 30,231 26,500 5,000 32,950 11,267 49,541 122,242 24,973 4,027 1,400 3,110 54,244 132,301 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 33 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:57 Page 34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7. INCOME TAX Analysis of the Tax Charge No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2014 nor for the year ended 31 December 2013. Factors Aﬀecting the Tax Charge The reasons for the diﬀerence between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to the result for the year are as follows: 2014 £ 2013 £ Loss on ordinary activities before tax (1,917,190) (2,041,743) Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 21% (2013 – 23%) Eﬀects of: Expenses not deductible for tax purposes Tax losses carried forward Total income tax (402,610) (469,601) 64,444 338,166 – 340,998 128,603 – Deferred Tax The Group has carried forward losses amounting to £3,397,055 as at 31 December 2014 (2013: £2,312,420). As the timing and extent of taxable proﬁts are uncertain, the deferred tax asset arising on these losses has not been recognised in the Financial Statements. 8. CASH FLOWS FROM DISCONTINUED OPERATIONS The Company made the decision to divest NewMines Holding Limited and as such the assets within NewMines Holding Limited were disposed of on 27 March 2014 as detailed in Note 4. AME West Africa Limited and its subsidiary, Caracal Gold Mali SARL, were disposed of during the year ended 31 December 2013 as detailed in Note 4. Group cash ﬂows from discontinued operations Operating cash ﬂows Investing cash ﬂows Financing cash ﬂows Total cash ﬂows Group 2013 £ 310,960 (338,373) – (27,413) 2014 £ – – – – Company 2014 £ 2013 £ – – – – – – – – 34 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:57 Page 35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 8. CASH FLOWS FROM DISCONTINUED OPERATIONS continued Analysis of the result of discontinued operations Revenue Expenses Impairment (Loss)/Proﬁt on disposal of subsidiaries (Note 4) Loss before tax of discontinued operations Tax Loss after tax of discontinued operations Group Company 2014 £ – – – (1,568) (1,568) – (1,568) 2013 £ – (182,246) (1,362,402)* 180,048 (1,364,600) – (1,364,600) 2014 £ – – – 41,753 41,753 – 41,753 2013 £ – – (1,362,402)* – (1,362,402) – (1,362,402) * The Directors reviewed the carrying value of the intangible assets and have included an impairment charge of nil (2013: £1,362,402). The impairment in the 2013 ﬁnancial year (see note 11) was against the carrying value of the Karan and Diatissan licences. The impairment charge has been restated based on the £250,000 consideration received in the sale of New Mines Holdings Limited and Tobon Tondo S.U.A.R.L. 9. LOSS OF PARENT COMPANY As permitted by Section 408 of the Companies Act 2006, the proﬁt and loss account of the parent Company is not presented as part of these Financial Statements. The parent Company’s loss for the ﬁnancial year was £3,811,407 (2013: £627,716). 10. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares. In accordance with IAS 33 as the Group is reporting a loss for both this and the preceding year the share options, warrant options and warrants are not considered dilutive because the exercise of share options would have the eﬀect of reducing the loss per share. Reconciliations are set out below. Basic Loss Per Share Losses attributable to ordinary shareholders: Total loss for the year Continuing operations Discontinued operations Weighted average number of shares Loss per share – total loss for the year Loss per share – continuing operations Loss per share – discontinued operations 2014 £ 2013 £ (1,917,190) (1,917,190) – 167,870,908 0.0114 0.0114 – (2,041,743) (677,143) (1,364,600) 100,004,746 0.0204 0.0068 0.0136 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 35 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:57 Page 36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. INTANGIBLE ASSETS (Group) Cost At 1 January 2013 Additions Transfers from tangible assets Disposals (Note 4) Exchange diﬀerences At 1 January 2014 Additions Disposals (Note 4) Exchange diﬀerences At 31 December 2014 Amortisation and impairment At 1 January 2013 Impairment charge for the year from discontinued operations Amortisation charge for the year Exchange diﬀerences At 1 January 2014 Amortisation charge for the year Eliminated on disposal Exchange diﬀerences At 31 December 2014 Net Book Value At 31 December 2014 At 31 December 2013 Exploration and evaluation £ 2,080,604 824,638 11,904 (928,667) 47,430 2,035,909 1,473,922 (1,572,679) 36,975 1,974,128 – 1,362,402 – (22,478) 1,339,924 – (1,318,299) (21,625) Other £ 11,640 – – – – 11,640 – – – 11,640 5,577 – 2,910 – 8,487 3,153 – – Total £ 2,092,244 824,638 11,904 (928,667) 47,430 2,047,550 1,473,922 (1,572,679) 36,975 1,985,768 5,577 1,362,402 2,910 (22,478) 1,348,411 3,153 (1,318,299) (21,625) – 11,640 11,640 1,974,128 695,985 – 1,974,128 3,153 699,138 The exploration and evaluation assets referred to in the table above comprise expenditure in relation to exploration licences in the Republic of Mali, Oman and Mozambique. The Directors consider that for the purposes of assessing impairment, the above exploration and evaluation expenditure is allocated to the following licence areas, representing the Group’s Cash Generating Units (“CGUs”). Karan and Diatissan (Mali) Jangamo (Mozambique) Blocks 4, 5 and 6 (Oman) 2014 £ – 1,047,382 926,746 1,974,128 2013 £ 250,000 445,985 – 695,985 The Directors have reviewed the carrying value of the intangible assets and have included an impairment charge of nil (2013: £1,362,402). The impairment in the 2013 ﬁnancial year (see Note 8) was against the carrying value of the Karan and Diatissan licences. The impairment charge was calculated based on the £250,000 consideration received in the sale of New Mines Holdings Limited and Tobon Tondo S.U.A.R.L. 36 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:57 Page 37 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. INTANGIBLE ASSETS (Group) continued The Directors consider that the remaining carrying value of the intangible assets is not impaired based on an assessment of the recoverable amount of each of the Group’s CGUs. INTANGIBLE ASSETS (Company) Cost At 1 January 2013 Additions At 1 January 2014 Additions At 31 December 2014 Amortisation At 1 January 2013 Charge for the year At 1 January 2014 Charge for the year At 31 December 2014 Net Book Value At 31 December 2014 At 31 December 2013 Total £ 11,640 – 11,640 47,391 59,031 5,577 2,910 8,487 3,153 11,640 47,391 3,153 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 37 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:58 Page 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 12. PROPERTY, PLANT AND EQUIPMENT (Group) Cost At 1 January 2013 Additions Transfers to intangible assets Disposals (Note 4) Exchange diﬀerences At 1 January 2014 Additions Exchange diﬀerences At 31 December 2014 Depreciation At 1 January 2013 Charge for year Disposals (Note 4) Exchange diﬀerences At 1 January 2014 Charge for year Exchange diﬀerences At 31 December 2013 Net Book Value At 31 December 2014 At 31 December 2013 13. INVESTMENTS Listed Investments in Alecto Group Non Current At 1 January 2014 Additions at cost Conversion of loan note Change in market value of investment Transfer to Current At 31 December 2014 Current At 1 January 2014 Transfer from Non Current At 31 December 2014 Plant and machinery £ Motor vehicles £ Oﬃce Equipment £ 173,202 6,380 (11,904) (174,332) 6,654 – – – – 27,598 19,882 (46,238) (1,242) – – – – – – – 53,832 – – (55,900) 2,068 – 27,505 1,578 29,083 24,092 6,797 (34,116) 3,227 – 2,149 123 2,272 – 26,811 – 6,954 – – (7,221) 267 – 10,228 556 10,784 5,124 642 (5,962) 196 – 6,951 399 7,350 – 3,434 – Total £ 233,988 6,380 (11,904) (237,453) 8,989 – 37,733 2,134 39,867 56,814 27,321 (86,316) 2,181 – 9,100 522 9,622 – 30,245 – Quantity of shares held Share Price £ % of Alecto Issued Share Capital Listed investments £ 121,739,130 20,000,000 32,045,742 – 0.02325 0.01250 0.0085 – 14.8% 2.4% 3.9% – – – – 173,784,872 0.0065 19.58% 2,830,435 250,000 272,389 (2,223,222) (1,129,602) – – 1,129,602 1,129,602 38 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:58 Page 39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 13. INVESTMENTS continued The Investment in Alecto has been classiﬁed as current at 31 December 2014 as the lock-in period expired on 4 October 2014 and the Group has entered a 12 month orderly market period for 128,695,652 of the 173,784,872 shares held at that date, with the balance being freely tradeable. In August 2013 the Group announced the conditional agreement to divest its subsidiary, AME West Africa Limited to Alecto Minerals Plc (“Alecto”). Included within the opening balance above is £1,250,000 in respect of 108,695,652 shares acquired in Alecto in respect of this divestment and a share subscription of 13,043,478 shares in Alecto for £150,000. The change in market value represents the fair value of shares held at the reporting date less the cost. The fair value of the shares being the market value of the Alecto shares at the reporting date of 31 December 2014. On 27 March 2014 the Company sold to Alecto its subsidiary, NewMines Holdings Limited, which, through its wholly owned subsidiary Tobon Tondo, holds the exploration rights to the Karan and Diatissan gold projects in Mali. The consideration payable of £250,000 was satisﬁed by the issue of 20,000,000 ordinary shares in Alecto which was considered to be its value. On 27 July 2014 the Unsecured Loan Note (“Convertible Loan”) in Alecto Minerals Plc (“Alecto”) has been converted into 30,434,783 ordinary shares in Alecto (“Shares”). As prescribed by the terms of the Convertible Loan entered into in October 2013 in relation to the disposal of AME West Africa Ltd to Alecto, the £350,000 Convertible Loan has been converted at a ﬁxed rate of £0.0115 per ordinary Share. The market value at the date of conversion was £0.0085 per Share. Additionally 1,610,959 Shares have been issued in satisfaction of the £18,831 interest earned on the Convertible Loan. Following the issue of the resulting 32,045,742 Shares, the Company’s shareholding in Alecto will be 173,784,872 Shares acquired. Company Non Current At 1 January 2014 Additions Conversion of loan note Change in market value of investment Disposals Transfer to Current At 31 December 2014 Current At 1 January 2014 Transfer from Non Current At 31 December 2014 Shares in Group undertakings & listed investments £ 2,956,562 250,081 272,389 (2,223,222) (125,927) (1,129,602) 281 – 1,129,602 1,129,602 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 39 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:58 Page 40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 13. INVESTMENTS continued In September 2013 the Group entered into an agreement to acquire 80% of the share capital of Matilda Minerals Lda (“Matilda”), the owner of a mineral sands exploration project in a world class mineral sands province in Mozambique. In respect of the remaining 20% shareholding in Matilda Minerals Plc, this will be free carried at the Company’s cost until the point of decision to carry out a Deﬁnitive Feasibility Study. When this point is reached the 20% shareholder can either: (a) contribute in proportion to its shareholding at that time; (b) become diluted in accordance with a pre-determined methodology; or (c) sell its shareholding pro rata to the Project value. The investment in Matilda has been accounted for as an asset acquisition and is included in intangible assets in Note 11. A new 100% subsidiary Company, Savannah Resources B.V. was set up to be the immediate parent Company of Gentor Resources Inc. with an initial investment of €100 (~£81) in the ordinary share capital. On 10 April 2014 the Company entered into an agreement to acquire 100% of Gentor Resources Inc.’s subsidiary, Gentor Resources Limited (“GRL”) through a the subsidiary, Savannah Resources B.V., which in turn acquired interests in Al Fairuz, Gentor Resources LLC, and Al Zuhra. Gentor Resources Limited has a 65% interest in Al Fairuz (Block 5) and the right to earn up to a 70% interest in Al Zuhra (Block 6) exploration licences in Oman. In consideration for acquiring 100% of the issued share capital of GRL, the Company initially paid cash consideration of USD 800,000. Additionally milestone payments, to be satisﬁed (up to 50% payable in ordinary shares in the Company) as follows: (a) USD 1,000,000 upon a formal ﬁnal investment decision for the development of the Block 5 Licence; (b) USD 1,000,000 upon the production of the ﬁrst saleable concentrate or saleable product from ore derived from the Block 5 Licence; (c) USD 1,000,000 within six months of the payment of the Deferred Consideration in (b). The Company will be responsible for all of the funding of the projects. This funding will be in the form of loans which would be reimbursed prior to any dividend distribution to shareholders. In November 2014 the Group entered into an earn-in agreement (“Earn-in”) to acquire up to a 65% interest in Al Thuraya LLC (“Al Thuraya”) which wholly owns the highly prospective Block 4 Copper Project in Oman. In order for the Group to achieve a 51% shareholding in Al Thuraya, they are required to make a capital contribution of US$2,000,000 (~GBP £1,287,500) within two years and a further US$2,600,000 (~GBP £1,674,000) cash within four years to receive a further 14% shareholding in Al Thuraya. These funds will be used for exploration activities. 40 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:58 Page 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 13. INVESTMENTS continued The Company had the following subsidiary undertakings, either directly or indirectly, at 31 December 2014, which have been included in the Consolidated Financial Statements. Subsidiary AME East Africa Limited Matilda Minerals Limitada Panda Recursos Limitada Savannah Resources B.V. Gentor Resources Limited Al Fairuz Mining Co L.L.C. Gentor Resources L.L.C. Al Zuhra Mining L.L.C. Al Thuraya Mining L.L.C. African Mining & Exploration Limited Country of Incorporation Nature of business Mining & exploration Mining & exploration United Kingdom Holding Company Mozambique Mozambique The Netherlands Holding Company Holding Company British Virgin Is. Mining & exploration Oman Dormant Oman Mining & exploration Oman Mining & exploration Oman Class of share Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary % Holding 100% 80%3 99.99% 100% 100% 65%3 70%3 40%1, 3 0%2, 3 United Kingdom Dormant Ordinary 100% 1 The Group has legal rights to 40% of equity holding, oﬃcial registration of the ownership is pending. 2 Al Thuraya has been consolidated at 31 December 2014 as the Group has controlling rights to the Project via the Earn-in. 3 These entities have been consolidated 100% despite the Group owing less than 100% of the voting rights. This is due to the Company having Earn-in contracts whereby the Company is the only contributing party and has the ability to control the operations. 14. LOAN RECEIVABLES Loan Derivative Group Company 2014 £ – – – 2013 £ 228,474 344,906 573,380 2014 £ – – – 2013 £ 228,474 344,906 573,380 The loans receivable above relate to the purchase of convertible loan notes in Alecto Minerals Plc. The loan was converted in July 2014 into Alecto’s shares at a ﬁxed price of 1.15 pence through the issue of 30,434,783 ordinary Alecto shares, refer to note 13. This derivative has been recognised at fair value using the Black Scholes valuation technique. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 41 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:58 Page 42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15. TRADE AND OTHER RECEIVABLES Non-Current: Other receivables Amounts due from subsidiaries Current: VAT recoverable Other receivables 16. CASH AND CASH EQUIVALENTS Group 2013 £ 2,998 – 2,998 31,449 76,766 108,215 2014 £ 17,049 – 17,049 46,331 36,259 82,590 Company 2014 £ 2013 £ – 2,301,121 2,301,121 46,331 12,663 58,994 - 310,354 310,354 30,630 76,595 107,225 Group 2014 £ 2013 £ Company 2014 £ 2013 £ Cash at bank and in hand 1,778,338 859,616 1,634,371 855,023 17. LOAN PAYABLES The Company issued an Unsecured Convertible Instrument to Bergen on 10 April 2014 with a nominal value of US$400,000 (£237,925 at date of issue), which was convertible at Bergen’s election into ordinary shares in the Company (the “Convertible Security”). The relevant conversion price is the lesser of (a) 91% of the average of ﬁve daily volume-weighted average prices of the Company’s shares on AIM during a speciﬁed period preceding the date of the conversion of the Convertible Security and (b) 135% of the average of the daily volume-weighted average prices of the Company’s shares for the 20 consecutive trading days preceding 10 April 2014. This Convertible Instrument was fair valued using the Black-Scholes valuation technique. In November 2014 the Convertible Security was exercised by Bergen. There are no loans payable as at 31 December 2014. 42 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:58 Page 43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18. SHARE CAPITAL Allotted, issued and fully paid At beginning of year Issued during year: Cash subscription by David Archer (Director) Share placement Bergen ﬁnancing arrangement Acquisition of 80% of Matilda Minerals Lda In lieu of notice In lieu of cash for professional services1 2014 2013 £0.01 ordinary shares number £0.01 ordinary shares number £ £ 138,365,781 1,383,658 84,213,306 842,133 – 55,173,104 26,244,600 – – 3,386,229 – 551,731 262,446 – – 33,862 22,222,224 18,047,748 222,222 180,478 10,643,107 2,666,667 572,729 106,431 26,667 5,727 At end of year 223,169,714 2,231,697 138,365,781 1,383,658 1 The shares issued in lieu of cash for professional services were valued at the fair value of the services received, £132,393 has been recorded in share premium for these transactions. The par value of the Company’s shares is £0.01 Refer to Note 24 for details of warrants and options issued. 19. TRADE AND OTHER PAYABLES Current: Trade payables Other payables Accruals and deferred income Group 2014 £ 2013 £ 100,813 15,969 140,356 257,138 172,307 8,635 138,950 319,892 Company 2014 £ 71,111 11,738 74,084 2013 £ 78,224 3,916 38,065 156,933 120,205 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 43 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:58 Page 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 20. FINANCIAL INSTRUMENTS Financial Instruments - Risk Management In common with all other businesses, the Group is exposed to risks that arise from its use of ﬁnancial instruments. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these Financial Statements. There have been no substantive changes in the Group’s exposure to ﬁnancial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. Principal Financial Instruments The principal ﬁnancial instruments used by the Group, from which ﬁnancial instrument risk arises, are as follows: • • • • • • loan receivables trade and other receivables derivatives – equity conversion option in receivables/payables convertible to share capital cash at bank trade and other payables investments Trade and other payables fall due for payment within 3 months from the reporting date. Liquidity Risk The Group has suﬃcient funding in place to meet its operational commitments and is not exposed to any liquidity risk but in common with many exploration companies, the Company is likely to need to raise funds for its exploration activities. The Group’s policy continues to be to ensure that it has adequate liquidity by careful management of its working capital. The Board receives rolling 18-month cash ﬂow projections on a regular basis as well as information regarding cash balances. At the reporting date, these projections indicated that the Group expected to have suﬃcient liquid resources to meet its current obligations under all reasonably expected circumstances. Foreign Exchange Risk The Group is exposed through its operations to foreign exchange risk which arises because the Group has overseas operations located in Mozambique whose functional currency is MZN and in Oman whose functional currency is OMR which is pegged to the USD. The Group’s net assets arising from overseas operations are exposed to currency risk resulting in gains or losses on retranslation into Pound Sterling. Foreign exchange risk also arises when individual Group entities enter into transactions denominated in a currency other than their functional currency. The Group’s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency (Euro, OMR, MZN or Pound Sterling) with the cash remitted to their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insuﬃcient reserves of that currency to settle them) cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group. To mitigate the risk of the CFA / Euro expenditure in Oman, the Group holds cash in a Euro denominated bank account, suﬃcient to meet committed expenditure and other liabilities. The OMR is pegged to the USD at a rate of 1 OMR to 2.6 USD. To further mitigate foreign exchange risk, larger contracts in Mozambique are denominated in USD. 44 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:58 Page 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 20. FINANCIAL INSTRUMENTS continued Market Risk The Group holds an equity investment in Alecto (see Note 13). The Directors believe that the exposure to market price risk from this activity is acceptable in the Group’s circumstances. The eﬀect of a 10% increase in the value of the equity investments held at the reporting date would, all other variables held constant, have resulted in an increase in other comprehensive income and net assets of £112,960 (2013: £283,043). A 10% decrease in their value would, on the same basis, have decreased other comprehensive income and net assets by the same amount. Credit Risk The Company is exposed to credit risk on its’ receivables from its subsidiaries. The subsidiaries are exploration companies with no current revenue and therefore, whilst the receivables are due on demand, they are not expected to be paid until there is a successful outcome on an exploration project resulting in revenue being generated by a subsidiary. Fair Value Derivatives are measured at fair value and relate to assets traded in an active market. Fair values are determined using the quoted share price and applying the Black-Scholes valuation methodology. The fair values of derivatives as at 31 December 2014 were as follows: Financial instrument Loan Receivable Derivative – equity conversion option within a receivable convertible to share capital. Loan Payable Derivative – equity conversion option within a payable convertible to share capital. Revaluation gains/ (losses) Measurement methodology £ Fair value £ – – (314,517) Based on share price using Black-Scholes model (174,565) Based on share price using Black-Scholes model The fair values of derivatives as at 31 December 2013 were as follows: Financial instrument Loan Receivable Derivative – equity conversion option within a receivable convertible to share capital. Fair value £ 344,906 Revaluation gains/ (losses) Measurement methodology Based on price using Black- Scholes model £ 178,184 The level of the fair value hierarchy within the measurement is categorised as Level 2 and there are no unobservable inputs within the measurement. There were no transfers between Level 1 and Level 2 for the year. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 45 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:58 Page 46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 20. FINANCIAL INSTRUMENTS continued The loan receivable derivative valuation has been calculated using a Black-Scholes Model. The valuation at conversion for 2014 and at year end for 2013 has been calculated using the following parameters: Stock asset price (£) Option strike price (£) Maturity (years) Risk-Free interest rate Volatility 2014 £ 0.0085 0.012 0.2 2.5% 100% 2013 £ 0.023 0.012 0.75 2.5% 100% The loan payable derivative valuation at conversion has been calculated using a Black-Scholes Model and using the following parameters: Stock asset price (£) Option strike price (£) Maturity (years) Risk-Free interest rate Volatility Financial instruments by category (Group) As at 31 December 2014 Investment in Alecto Cash and cash equivalents At 31 December 2013 Investment in Alecto Loan receivables Derivative Cash and cash equivalents 2014 £ 0.6 0.36 2.6 2.5% 64% 2013 £ – – – – – Assets at fair Loans and value through receivables proﬁt and loss £ – – £ – 1,778,338 1,778,338 – – 228,474 – 859,616 1,088,090 – – 344,906 – 344,906 Available for sale £ 1,129,602 – 1,129,602 2,830,435 – – – 2,830,435 Total £ 1,129,602 1,778,338 2,907,940 2,830,435 228,474 344,906 859,616 4,263,431 Available for sale assets are measured at fair value. The fair value hierarchy is level 1 as the valuation is based wholly on quoted prices. There were no transfers between level 1 and level 2 for the current year. 46 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:58 Page 47 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 20. FINANCIAL INSTRUMENTS continued Financial instruments by category (Group) Continued As at 31 December 2014 Trade and other payables At 31 December 2013 Trade and other payables Financial liabilities at amortised cost £ Total £ 257,138 257,138 319,892 319,892 As at 31 December 2014 and 31 December 2013, the currency exposure of the Group was as follows: At 31 December 2014 GBP £ USD £ AUD £ OMR £ MZN £ Total £ Other £ Cash and cash equivalents 1,166,120 Trade and other payables 130,197 At 31 December 2013 Cash and cash equivalents 852,299 573,3800 Loan receivables 206,674 Trade and other payables 483,480 25,871 – 49,314 83,758 43,080 44,980 8,675 – 1,778,338 257,137 – – – – – – – – – – 4,593 – 107,852 2,724 – 5,366 859,616 573,380 319,892 Capital Disclosures The Group’s objectives when maintaining capital are: – – to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and beneﬁts for other stakeholders, and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The Company currently does not have any debt. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 47 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:58 Page 48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21. CONTINGENT LIABILITIES Details of contingent liabilities where the probability of future payments is not considered remote are set out below, as well as details of contingent liabilities, which although considered remote, the Directors consider should be disclosed. The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacriﬁce of economic beneﬁts will be required or the amount is not capable of reliable measurement. Deferred consideration payable in relation to the acquisition of 80% shareholding in Matilda Minerals Lda In consideration for acquiring 80% shareholding in Matilda Minerals Lda, the Company paid initial consideration of AUD$400,000 (~GBP £210,000) in ordinary shares and a cash payment for cost reimbursements of AUD$125,000 (~GBP £66,000). Additionally milestone payments, to be satisﬁed by the issue of ordinary shares in the Company are payable as follows: (a) AUD$500,000 (~GBP £263,000) upon the establishment of a JORC Inferred Resource of 150Mt @ 3% THM; (b) AUD$500,000 (~GBP £263,000) upon the establishment of a JORC Indicated Resource of 350Mt @ 3% THM; (c) AUD$500,000 (~GBP £263,000) upon the establishment of a JORC Indicated Resource of 500Mt @ 3% THM. Deferred consideration payable in relation to the acquisition of Oman Copper On 15 July 2014 the Company completed the acquisition of interests in the highly prospective Block 5 and Block 6 copper projects in the Semail Ophiolite belt in the Sultanate of Oman from the TSX-Venture listed Gentor Resources Inc. The Company paid initial consideration of USD $800,000 (~GBP £515,000) with the following deferred consideration required to complete the acquisition of 100% of the issued share capital of Gentor Resources Ltd (“GRL”): 1. Deferred Consideration (up to 50% payable in Savannah shares) (a) a milestone payment of USD $1,000,000 (~GBP £644,000) upon a formal ﬁnal investment decision for the development of the Block 5 Licence; (b) a milestone payment of USD $1,000,000 (~GBP £643,750) upon the production of the ﬁrst saleable concentrate or saleable product from ore derived from the Block 5 Licence; and (c) a milestone payment of USD $1,000,000 (~GBP £643,750) within six months of the payment of the Deferred Consideration in (b). 2. Other Information (a) the Company will be responsible for all of the funding of the projects. This funding will be in the form of a loan which would be reimbursed prior to any dividend distribution to shareholders; and (b) the Company is expected to spend approximately GBP £600,000 on exploration in the ﬁrst 12 months of owning GRL. 48 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:58 Page 49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 22. RELATED PARTY DISCLOSURES Details of Director’s remuneration are disclosed in note 3. During the year £62,545 (2013: £25,614) was payable to Blue Bone Consulting Pty Ltd (a Company controlled by Dale Ferguson) for consultancy fees of which £5,632(2013: £nil) remained unpaid. In 2013 £141,286 was payable to J Cubed Ventures Ltd (a Company controlled by former Director Mark Jones) for consultancy fees, no fees were payable in 2014. The amounts payable to Blue Bone Consulting Pty Ltd and J Cubed Ventures Ltd have been included in the Directors’ remuneration in note 3. During the year £18,038 (2013: Nil) was payable to Arlington Group Asset Management (a Company which Charlie Cannon-Brookes is a Director and Shareholder) for the provision of a serviced oﬃce. No amounts remain unpaid. During the year £1,750 (2013: Nil) was payable to Lautner Group Limited (a Company which David Archer’s close family member is a Director) for the provision of oﬃce support. No amounts remain unpaid. These transactions were entered into on an arms-length basis. 23. COMMITMENTS Operating Lease Commitments No later than 1 year Later than 1 year and no later than 5 years Later than 5 years 2014 £ 30,372 – – 30,372 2013 £ 30,215 12,292 – 42,507 The operating lease commitments are for business premises in the United Kingdom, Mozambique and Oman. Other Commitments As announced on 18 November 2014 the Group entered into an agreement to acquire Al Thuraya LLC (“Al Thuraya”), owner of the highly prospective Block 4 Copper Project. In order for the Group to achieve a 51% shareholding in Al Thuraya, the Company is required to make an initial contribution of US$400,000 (~GBP £257,500), a capital contribution of US$1,600,000 (~GBP £1,030,000) within two years and a further US$2,600,000 (~GBP £1,674,000) cash contribution within four years to receive a further 14% shareholding in Al Thuraya. These funds will be used for exploration activities. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 49 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:58 Page 50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24. SHARE OPTIONS AND WARRANTS Share options and warrants to subscribe for Ordinary Shares in the Company are granted to certain employees, Directors, investors and suppliers providing services to the Group. Some of the options issued vest immediately and others over a vesting period and may include performance conditions. Options are forfeited if the employee leaves the group before the options vest. 2014 Weighted 2013 Weighted average Weighted exercise remaining life price Number average Weighted exercise remaining life price 4.5p 6.8p – 5.2p 12.5p – 12.5p 12.5p 11.0p 11.0p 12.5p 4.6p – 5,550,000 – 16,386,776 – (4,713,333) 3.19 17,223,443 – 4,850,000 – (2,850,000) – – 0.81 2,000,000 – 57,949,993 – 11,111,112 – – 3.50 69,061,105 10.5p 3.6p 8.7p 4.5p 12.5p 12.5p – 12.5p 12.5p 3p – 11.0p – – – 4.18 – – – 1.81 – – – 1.43 Number 17,223,443 7,300,000 – 24,523,443 2,000,000 – (1,636,740) 1 363,260 69,061,105 2,800,000 (57,949,993) 2 13,911,112 Share Options Opening Balance Granted Lapsed Closing Balance Share Warrant Options Opening Balance Lapsed Forfeited Closing Balance Investor Warrants Opening Balance Granted Lapsed Closing Balance 1 Share Warrant Options were forfeited upon the lapse of the 2010 Investor Warrants 2 Investor Warrants expired on 1 November 2014 50 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:58 Page 51 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24. SHARE OPTIONS AND WARRANTS continued Share schemes outstanding at 31 December 2014 are as follows: Outstanding Exercisable Exercisable Outstanding 31 December 31 December 31 December 31 December 2013 2014 2014 2013 100,000 100,000 100,000 2,000,000 1,750,000 2,000,000 1,750,000 100,000 3,726,667 3,726,667 3,726,667 3,726,667 5,321,776 5,321,776 5,321,776 5,321,776 – 4,500,000 4,500,000 4,500,000 1,575,000 1,575,000 1,575,000 1,575,000 – 3,000,000 3,000,000 – 3,300,000 3,300,000 – – 1,000,000 – – – Exercise Price Expiry Date 10.0p 10.4p 4.6p 3.0p 3.0p 4.6p 8.8p 5.0p 7.0p 21 October 2015 28 April 2016 31 January 2018 20 July 2018 21 September 2018 30 September 2018 25 February 2019 3 July 2017 12 September 2017 24,523,443 23,273,443 17,223,443 12,473,443 363,260 317,852 2,000,000 1,750,000 12.5p 21 October 2015 363,260 317,852 2,000,000 1,750,000 – – 57,949,993 57,949,993 11,111,112 11,111,112 11,111,112 11,111,112 – 2,800,000 2,800,000 – 12.5p 3.0p 11.0p 1 November 2014 19 July 2018 17 April 2018 Share Options October 2010 April 2011 February 2013 July 2013 September 2013 September 2013 February 2014 July 2014 September 2014 Share Warrant Options October 2010 Investor Warrants October 2010 September 2013 April 2014 13,911,112 13,911,112 69,061,105 69,061,105 All of the options and warrants granted attract a share based payment charge. The grants have been measured using the Black-Scholes pricing model that takes into account factors such as the option life, share price volatility and the risk free rate. Volatility was calculated with reference to the Company’s historical share price volatility up to the grant date to reﬂect a term approximate to the expected life of the option. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 51 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p25-p53 26/02/2015 15:58 Page 52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24. SHARE OPTIONS AND WARRANTS continued The range of inputs of the options and warrants granted in the year are as follows: Share Options Stock price Fair value of option Exercise Price Expected volatility Expected life Risk free rate Dividend yield Investor Warrants Stock price Fair value of option Exercise Price Expected volatility Expected life Risk free rate Dividend yield 2014 2013 4.6p – 8.2p 1.9p – 4.4p 5.0p – 8.8p 62% – 66% 3 – 5 years 2.5% nil 1.9p – 4.1p 0.8p – 3.0p 3.0p – 4.6p 53% – 62% 5 years 2.5% nil 7.8p 3.2p 11.0p 65% 4 years 2.5% nil 4.0p* 2.4p 3.0p 62% 5 years 2.5% nil * The stock asset price was greater than the option strike price due to the delay between the Board approval and the Shareholder approval of the options. This fair value is the cost that is charged to the Statement of Comprehensive Income and is spread over the expected vesting period which, for non-market vesting conditions (as noted above), is revised at each period end. If the issue was a share issue cost the charge is to the Share Premium account. Share options issued During the year 7,300,000 share options were issued to employees and Directors to assist with the recruitment, reward and retention of key employees. Some of the options vest immediately and some vest upon the employee meeting service and/or performance conditions. During the 2013 ﬁnancial year 6,565,000 share options were issued to key employees and the former CEO Mark Jones, in lieu of cash salary as part of the Company’s cash conservation measures. A further 9,821,776 share options were issued in respect of either reduced fees/nominal fees (£1 per annum) paid to Directors and key personnel. Investor Warrants issued During the year 2,800,000 warrants were issued to Bergen Global Opportunity Fund LP in accordance with the execution of the facility agreement. The warrants were issued with an exercise price of 11.0p, equal to 135% of the average weighted price for the 20 trading days prior to issue. During the 2013 ﬁnancial year David Archer was granted 11,111,112 warrants in consideration of a cash subscription of £500,000 for shares and warrants with shareholder approval obtained at a shareholders meeting on 24 September 2013. Options issued to Directors Refer to Report of Directors for share options and warrants issued to Directors. 52 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p25-p53 26/02/2015 15:58 Page 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 25. EVENTS SINCE THE REPORTING DATE On 19 January 2015 the Company issued 637,381 ordinary shares as consideration for an exploration database relating to the Block 4 Copper Project in Oman. The ordinary shares were issued to settle the AUD 40,000 (~£22,000) consideration for the database. The Company has disposed of 16.1m of the 173m shares it held in Alecto at 31 December 2014 for consideration of £49k. The valuation of the Alecto shares at 31 December 2014 was based on a share price of £0.0065 and as at 23 February 2015 the share price is £0.0015. The Company considers this to be a non-adjusting post balance sheet event. On 24 February 2015 the Company transferred US$400,000 (~GBP £257,500) as an initial capital contribution to achieve a 51% shareholding in Al Thuraya. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 53 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p54-end 26/02/2015 15:58 Page 54 NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that the Annual General Meeting of Savannah Resources Plc (‘the Company’) will be held at the oﬃces of RFC Ambrian Ltd, Condor House, 10 St. Paul’s Churchyard, London EC4M 8AL, on 15 April 2015 at 11:00 a.m. for the purpose of considering and, if thought ﬁt, passing the following resolutions which will be proposed as ordinary resolutions in the cases of resolutions 1-4 and as a special resolution in the case of resolution 5. ORDINARY BUSINESS 1 To receive the report of the Directors and the audited Financial Statements of the Company for the year ended 31 December 2014. 2 3 To re-appoint Mike Johnson who retires as a Director in accordance with article 23.1 of the Articles of Association at the conclusion of the meeting and, being eligible, oﬀering himself for re-election as a Director of the Company. To re-appoint BDO LLP as auditors of the Company to act until the conclusion of the next Annual General Meeting and to authorise the Directors to determine the remuneration of the auditors. ORDINARY RESOLUTION 4 That in substitution for all existing and unexercised authorities, the Directors of the Company be and they are hereby generally and unconditionally authorised for the purpose of section 551 of the Companies Act 2006 (‘the Act’) to exercise all or any of the powers of the Company to allot equity securities (within the meaning of Section 560 of the Act) up to a maximum nominal amount of £1,400,000 provided that this authority shall, unless previously revoked or varied by the Company in general meeting, expire on the earlier of the conclusion of the next Annual General Meeting of the Company or 15 months after the passing of this Resolution, unless renewed or extended prior to such time except that the Directors of the Company may before the expiry of such period make an oﬀer or agreement which would or might require equity securities to be allotted after the expiry of such period and the Directors of the Company may allot relevant securities in pursuance of such oﬀer or agreement as if the authority conferred hereby had not expired. SPECIAL RESOLUTION 5 That in substitution for all existing and unexercised authorities and subject to the passing of the immediately preceding Resolution, the Directors of the Company be and they are hereby empowered pursuant to section 570 of the Act to allot equity securities (as deﬁned in section 560 of the Act) pursuant to the authority conferred upon them by the preceding Resolution as if section 561(1) of the Act did not apply to any such allotment provided that the power conferred by the Resolution, unless previously revoked or varied by special resolution of the Company in general meeting, shall be limited: (a) to the allotment of ordinary shares arising from the exercise of options, warrant options and warrants outstanding at the date of this resolution; (b) to the allotment of equity securities in connection with a rights issue in favour of ordinary shareholders where the equity securities respectively attributable to the interest of all such shareholders are proportionate (as nearly as may be) to the respective numbers of the ordinary shares held by them subject only to such exclusions or other arrangements as the Directors of the Company may consider appropriate to deal with fractional entitlements or legal and practical diﬃculties under the laws of, or the requirements of any recognised regulatory body in, any territory; (c) the grant of a right to subscribe for, or to convert any equity securities into Ordinary Shares otherwise than under sub-paragraph (a) above, up to a maximum aggregate nominal amount of £150,000; 54 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p54-end 26/02/2015 15:58 Page 55 NOTICE OF ANNUAL GENERAL MEETING (d) pursuant to the share exchange agreement for 80% of the issued share capital of Matilda Minerals Lda, up to a maximum aggregate nominal value of £400,000; and (e) to the allotment (otherwise than pursuant to sub-paragraphs (a), (b), (c) and (d) above) of equity securities up to an aggregate nominal amount of £450,000 (approximately 20% of the Company’s issued share capital) in respect of any other issues for cash consideration; and shall expire on the earlier of the date of the next Annual General Meeting of the Company or 15 months from the date of the passing of this Resolution save that the Company may before such expiry make an oﬀer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such oﬀer or agreement as if the power conferred hereby had not expired. If you are a registered holder of Ordinary Shares in the Company, whether or not you are able to attend the meeting, you may use the enclosed form of proxy to appoint one or more persons to attend and vote on a poll on your behalf. A proxy need not be a member of the Company. A form of proxy is provided. This may be sent by facsimile transfer to 01252 719 232 or by mail using the reply paid card to: The Company Secretary Savannah Resources Plc c/o Share Registrars Limited Suite E First Floor 9 Lion and Lamb Yard Farnham Surrey GU9 7LL In either case, the signed proxy must be received no later than 48 hours (excluding non-business days) before the time of the meeting, or any adjournment thereof. Registered Oﬃce: By order of the Board Third Floor 55 Gower Street London WC1E 6HQ 24 February 2015 Stephen Ronaldson Company Secretary Registered in England and Wales Number: 07307107 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 55 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p54-end 26/02/2015 15:58 Page 56 NOTICE OF ANNUAL GENERAL MEETING Notes to the Notice of General Meeting Entitlement to Attend and Vote 1. Pursuant to Regulation 41 of the Uncertiﬁcated Securities Regulations 2001, the Company speciﬁes that only those members registered on the Company’s register of members 48 hours before the time of the Meeting shall be entitled to attend and vote at the Meeting. Appointment of Proxies 2. If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at the Meeting and you should have received a proxy form with this notice of meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. 3. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you wish your proxy to speak on your behalf at the Meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them. 4. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to diﬀerent shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please contact the registrars of the Company, Share Registrars Limited on 01252 821 390. 5. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks ﬁt in relation to any other matter which is put before the Meeting. Appointment of Proxy Using Hard Copy Proxy Form 6. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote. To appoint a proxy using the proxy form, the form must be: – – – Completed and signed; Sent or delivered to Share Registrars Limited at Suite E, First Floor, 9 Lion and Lamb Yard, Farnham, Surrey GU9 7LL or by facsimile transmission to 01252 719 232; and Received by Share Registrars Limited no later than 48 hours (excluding non-business days) prior to the Meeting. In the case of a member which is a Company, the proxy form must be executed under its common seal or signed on its behalf by an oﬃcer of the Company or an attorney for the Company. Any power of attorney or any other authority under which the proxy form is signed (or a duly certiﬁed copy of such power or authority) must be included with the proxy form. 56 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p54-end 26/02/2015 15:58 Page 57 NOTICE OF ANNUAL GENERAL MEETING Appointment of Proxy by Joint Members 7. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the ﬁrst-named being the most senior). Changing Proxy Instructions 8. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-oﬀ time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-oﬀ time will be disregarded. Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard-copy proxy form, please contact Share Registrars Limited on 01252 821 390. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. Termination of Proxy Appointments 9. In order to revoke a proxy instruction you will need to inform the Company using one of the following methods: By sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to Share Registrars Limited at Suite E, First Floor, 9 Lion and Lamb Yard, Farnham, Surrey GU9 7LL or by facsimile transmission to 01252 719 232. In the case of a member which is a Company, the revocation notice must be executed under its common seal or signed on its behalf by an oﬃcer of the Company or an attorney for the Company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certiﬁed copy of such power or authority) must be included with the revocation notice. In either case, the revocation notice must be received by Share Registrars Limited no later than 48 hours (excluding non-business days) prior to the Meeting. If you attempt to revoke your proxy appointment but the revocation is received after the time speciﬁed then, subject to the paragraph directly below, your proxy appointment will remain valid. Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated. Issued shares and total voting rights 10. As at 24 February 2015, the Company’s issued share capital comprised 223,807,095 ordinary shares of £0.01 each. Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company as at 24 February 2015 is 223,807,095. Communications with the Company 11. Except as provided above, members who have general queries about the Meeting should telephone the Company Secretary, Stephen Ronaldson, on (020) 7580 6075 (no other methods of communication will be accepted). You may not use any electronic address provided either in this notice of general meeting; or any related documents (including the chairman’s letter and proxy form), to communicate with the Company for any purposes other than those expressly stated. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 57 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n i F n o ti a m r o f n I M G A 235402 Savannah p54-end 26/02/2015 15:58 Page 58 NOTICE OF ANNUAL GENERAL MEETING CREST 12. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the General Meeting and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s speciﬁcations and must contain the information required for such instructions, as described in the CREST Manual (available via euroclear.com/CREST). The message, regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID: 7RA36) by the latest time(s) for receipt of proxy appointments speciﬁed above. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of Instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his or her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of CREST by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertiﬁcated Securities Regulations 2001. 58 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2014 235402 Savannah p54-end 26/02/2015 15:58 Page 60 DIRECTORS: SECRETARY: REGISTERED OFFICE: COMPANY INFORMATION Professor M S Johnson D S Archer D J Ferguson C Cannon-Brookes Chairman Executive Director Executive Director Non-Executive Director S F Ronaldson 55 Gower Street London WC1E 6HQ Third Floor 55 Gower Street London WC1E 6HQ REGISTERED NUMBER: 07307107 (England and Wales) AUDITORS: BANKERS: NOMINATED ADVISOR & BROKER: SOLICITORS: REGISTRARS: BDO LLP Chartered Accountants & Statutory Auditors 55 Baker Street London W1U 7EU NatWest Bank Plc St James’ & Piccadilly Branch PO Box 2DG 208 Piccadilly London W1A 2DG RFC Ambrian Ltd Condor House 10 St. Paul’s Churchyard London EC4M 8AL Ronaldsons LLP 55 Gower Street London WC1E 6HQ Share Registrars 9 Lion & Lamb Yard Farnham Surrey GU9 7LL WEBSITE: www.savannahresources.com 2 0 4 5 3 2 t n i r P l a i c n a n i F n a v i r e P

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